The virus, dubbed W95.Babylonia, is "spreading quickly worldwide" on Windows-based computers, said antivirus software company Symantec. The virus spreads using mIRC, Windows software that connects to the Internet relay chat software.
In addition, the virus automatically downloads software via the Internet to the infected computer, raising the possibility that the virus can update itself from a central site, Symantec said.
When a person with an infected computer logs on to mIRC, the virus sends copies of itself to all the people in the chat room. It disguises itself as a Year 2000 bug fix. If a recipient executes the file, the virus infects programs and Windows help files on the computer.
Symantec first saw the virus yesterday and has received about 20 submissions from customers so far.
Network Associates has had 25 reports of infection so far, said spokesman Brent Curry. The risk at this point is small because the virus hasn't done any damage yet, but it's a "time bomb" because the virus can update itself remotely.