The hemagglutinin (HA) and neuraminidase (NA) genes of H7 avian influenza virus (AIV) isolated between 1994 and 2002 from live-bird markets (LBMs) in the northeastern United States and from three outbreaks in commercial poultry have been characterized. Phylogenetic analysis of the HA and NA genes demonstrates that the isolates from commercial poultry were closely related to the viruses circulating in the LBMs. Also, since 1994, two distinguishing genetic features have appeared in this AIV lineage: a deletion of 17 amino acids in the NA protein stalk region and a deletion of 8 amino acids in the HA1 protein which is putatively in part of the receptor binding site. Furthermore, analysis of the HA cleavage site amino acid sequence, a marker for pathogenicity in chickens and turkeys, shows a progression toward a cleavage site sequence that fulfills the molecular criteria for highly pathogenic AIV.