UN health officials declare the first global flu pandemic in 40 years, after holding emergency talks on the swine flu crisis.
The World Health Organization called the meeting after a steep rise in the number of cases in Australia.
A BBC correspondent says it has little option but to declare a pandemic now there are nearly 28,000 recorded cases.
Reports say that the WHO had already told member countries it had decided to raise the alert to pandemic level.
Hong Kong said it was closing all its nurseries and primary schools for two weeks following 12 school cases.
The last global flu pandemic came in 1968 over the Hong Kong flu.
That pandemic killed about one million people.
A disease is classed as a pandemic when transmission between humans becomes widespread in at least two regions of the world.
The latest virus emerged in Mexico in April and since then thousands of cases have been confirmed throughout North and South America.
The H1N1 strain has spread to 74 countries but the WHO has so far resisted labelling the outbreak a full-blown pandemic.
WHO chief Margaret Chan talked to officials from eight countries with large flu outbreaks on Wednesday in an attempt to confirm the spread of the disease.
She said she believed the situation could be regarded as a pandemic but wanted clear evidence before making an announcement.
The BBC's Imogen Foulkes, in Geneva, says that while the number of cases has made the declaration inevitable, the problem is that the pandemic phase system is designed for a very different type of virus.
WHO spokesman Gregory Hartl said it had been expecting something more like the deadlier bird flu.
"It was believed that the next pandemic would be something like H5N1 bird flu, where you were seeing really high death rates, and so there were people who believed we might be in a kind of apocalyptic situation and what we're really seeing now with H1N1 is that in most cases the disease is self-limiting," he told the BBC.
WHO PANDEMIC ALERT PHASES
"Let's say 98 or 99% of the people we so far know to be affected recover without any need of hospitalisation.
The WHO will have to manage the global anxiety the declaration of a pandemic will generate, our correspondent says.
It is concerned not to trigger panic measures such as border closures and travel bans and is expected to advocate careful medical management, including the moderate use of anti-viral drug tamiflu.
Using it on a widespread preventative scale could simply create drug resistance, our correspondent adds.
The WHO's move follows Australia's confirmation of more than 1,200 cases - a four-fold increase in a week.
All primary schools and nurseries in Hong Kong are to shut for 14 days from Friday in a bid to contain the virus, the territory's chief executive Donald Tsang said.
It follows confirmation that 12 secondary school pupils have contracted the illness. Secondary schools are not yet being ordered to close.
At least 50 people are now confirmed to have the virus in the territory.
The head of the WHO's global influenza programme, Keiji Fukuda, said the situation had "evolved a lot" in recent days.
"We are getting close to knowing that we are in a pandemic situation," he said.
Although most sufferers experience normal flu symptoms and make a full recovery, the WHO has confirmed 141 deaths from 27,737 cases.