The Canadian Food Inspection Agency says scrapie (SKRAY'-pee) was confirmed in a sheep that recently died on the farm.
The agency says there is no human health risk associated with scrapie.
However, the CFIA aims to eradicate it from Canada as the disease has serious impacts on sheep.
It said in a weekend release that the farm was placed under quarantine because a sheep that originated from there had previously tested positive for scrapie.
Ontario Provincial Police are investigating the removal earlier this month of 31 sheep from the farm in violation of the quarantine order.