The drill in Tokushima prefecture in southern Japan was based on a scenario in which two people develop symptoms of bird flu after returning from a country where the H5N1 virus has mutated into a form that passes easily from person to person.
The first mock patient dies in hospital after local residents given roles as family members and neighbours test negative for the virus, an official at the prefectural office said.
But the second patient wanders off on a train and spreads the virus to two others before the drill ends, with the patient's whereabouts unclear although local areas are sealed off to prevent further infection.
As part of the drill, the local governor held a video conference call with Health Ministry officials in Tokyo to exchange information, and the prefecture was called on to update the public on the cases via the Internet.
Officials said there was no plan at present for a follow-up to the drill, which was the second for the government but the first held in conjunction with local authorities.
The H5N1 virus has killed 165 people worldwide since 2003, most of them in Asia, and more than 200 million birds have died from it, or been killed to prevent its spread.
Experts fear the virus could spark a pandemic if it develops into a form that is highly infectious among humans.
Japan's government estimates that such a virus could lead to deaths of up to 640,000 people within the country.
Japan has had four outbreaks of the H5N1 virus at poultry farms this year, although there have been no cases of human infection from the virus in the country.
Prior to this year, Japan suffered four outbreaks of the H5N1 bird flu in 2004.
There are some chicken farms in Tokushima, but so far there have been no outbreaks of the disease there.
REUTERS DKA BD1435