The food and agriculture ministry ordered the culling around Tarlai after reports that a bird had died at a poultry farm there Wednesday night.
"Yes, we have ordered slaughter of over 16,000 chickens", a food ministry spokesman said. He said the initiative was taken to prevent a fourth outbreak of the deadly bird flu virus in the country.
"The area has been sealed off with posters and placards saying 'Restricted Area'."
According to him, the poultry death had very strong clinical evidence and symptoms of H5N1. "We can confirm it only after laboratory tests, but we have protectively culled all the birds at the farm."
If confirmed, it would become the second case of avian flu near Islamabad and the fourth in the country.
The government on Sunday confirmed an H5N1 outbreak at another chicken farm near Islamabad.
Its first bird flu cases were confirmed last month at two chicken farms in North West Frontier Province bordering Afghanistan.
Authorities slaughtered 25,000 birds and sealed off the affected farms in the northwestern market town of Charsadda and the hill resort of Abbottabad.