The National Sheep Association (NSA), which represents the views and interests of sheep producers in the UK, said mixing different animals was "questionable at the best of times, but should be avoided when England is undergoing a period of mandatory housing measures for poultry due to bird flu outbreaks".
The Yorkshire farm where the case was found was a smallholding where sheep and poultry were being kept together, a spokesperson added.
NSA chief executive Phil Stocker said the positive case was "not a threat to food safety of consumers".
National Farmers' Union president Tom Bradshaw said: "Farmers are understandably concerned that avian influenza has been found in a sheep.
"This remains a single case within what is understood to be a backyard flock, and no other infection has been found amongst the remaining sheep.
"Commercial producers continue to do all they can to protect their animals by following strict biosecurity measures.
"While the risk to the nation's livestock population remains low, it's vital that all keepers of domesticated poultry, cattle, sheep and goats maintain high standards of biosecurity and remain vigilant for any signs of disease."
Defra has placed England in an "avian influenza protection zone" to prevent bird flu and stop it spreading.
Thirteen regions have also seen mandatory housing measures introduced, which state that birds must be kept inside.
They are Cheshire, Hull, East Riding of Yorkshire, Herefordshire, Lancashire, Merseyside, Norfolk, North Yorkshire, Shropshire, Suffolk, Worcestershire, and York.
The Food Standards Agency said properly cooked poultry and poultry products, including eggs, remained safe to eat.