Seven councils have withdrawn certain meat products from schools and care homes amid fears of horsemeat.
Welsh Bros Ltd, which supplies several councils, said a sample of meat had "potentially" tested positive.
Swansea council said its own test found horsemeat, while Bridgend, Neath Port Talbot, Cardiff, Carmarthenshire, the Vale of Glamorgan and Pembrokeshire said they took action as a precaution.
Welsh Bros said it was shocked and had been let down by a non-Welsh firm.
Swansea said it had removed minced beef from its menus after its own independent tests showed the presence of horsemeat.
The council is part of a consortium of local authorities supplied by Welsh Bros Ltd, of Newport, south Wales.
Earlier on Wednesday, several other councils said they were withdrawing certain meat products as a precaution.
Pembrokeshire council said it was withdrawing all mince products but said it had received assurances from its other suppliers that meats were traceable.
Cardiff council then followed suit saying it had decided to withdraw all beef food products sourced from Welsh Bros from all its schools, leisure centres, care homes and other council catering outlets.
It said no products had generated a positive result so far but "intensive sampling and testing" would continue.
Bridgend then said it had stopped using frozen mince beef from the supplier, followed by precautionary action by Carmarthenshire, Neath Port Talbot and the Vale of Glamorgan.
Alan Heycock, managing director of Welsh Bros, said: "We do our best to promote quality British products".
He said they had been let down by a non-Welsh company, adding: "We received an e-mail about this last night. A test came back positive. We haven't seen the certificate yet.
"This is all under investigation with trading standards now and we are waiting for further information".
The company said it believed it was an isolated incident.
The meat involved was distributed in December 2012.
"We're very busy contacting our customers now and letting them know," added Mr Heycock.
The company later issued a formal statement saying a sample of meat had "potentially" tested positive for horsemeat but the company had taken the decision to inform customers and withdraw the product immediately.
The statement said: "The batch affected was produced nearly three months ago. Welsh Bros Foods did have a clear test result for frozen free flow minced beef on 17.01.13. We submitted these samples when the horsemeat scandal first broke in January.
"We have since submitted further samples which we are still awaiting test results for.
"Welsh Bros has been provided with test results from other authorities who have tested more recent batches of our free flow minced beef and these have been reported as being clear.
"We therefore believe at this stage that this is an isolated incident.
"We have today issued a withdraw notice with the Food Standards Agency for frozen free flow minced beef produced between 13.12.12 which was the pack date of the suspect test and 17.01.13 which is the date we achieved our clear test result."
Newport council said its trading standards department was working with Welsh Bros, which is based in the city, and investigations into the source of the contamination were ongoing.
The council said Newport schools did not use the supplier but inquiries were taking place into whether council care homes had purchased the product.
In a separate development, Pembrokeshire council said it had also been made aware that frozen beef products supplied to Sodexo, which provides catering services to a private finance initiative school in Pembroke Dock, had also tested positive for horsemeat.
Sodexo has had a private catering contract with the school since it opened. Its meat was not bought through the Welsh Purchasing Consortium (WPC) which comprises the 16 local authorities in south, mid and west Wales, including Pembrokeshire.
The company - which says none of the affected products had been sent to the school - has withdrawn all frozen beef products from its UK catering operations.
Caerphilly council, which manages purchasing for the WPC, said it was contacting the other councils to see if they were affected by the horsemeat discovery.
Ceredigion council, although a member of the consortium, said it had never purchased any meat products from Welsh Bros of Newport. The authority said Castell Howell Ltd supplied all council establishments with fresh meat.
Blaenau Gwent said Welsh Bros did not supply its premises - nor those of Torfaen or Monmouthshire.
The Welsh Local Government Association (WLGA), the body that represents councils in Wales, said the fact the contamination had been identified was "testimony to the rigorous checks and tests that local government is conducting and demanding of its complex supply chain".
"The current priority for individual local authorities is to focus on those manufacturers that have been supplied by businesses implicated as potential sources of contamination," said WLGA chief executive Steve Thomas.
Conservative rural affairs spokeswoman Antoinette Sandbach AM called for quicker action by ministers to reassure the public about the integrity of food products in the wake of the horsemeat scandal.
"It is absolutely vital that the government responds to this swiftly and works closely with council officials and the FSA," she said.
Meanwhile, Alun Davies, deputy minister for agriculture, launched a new nationwide campaign promoting Welsh beef and lamb on Wednesday.
"What consumers want is clear labelling, so that consumers can make informed choices on their food purchases," he said.
"This is what the campaign aims to achieve; a simple statement of fact that if shoppers look for the Welsh beef, Welsh lamb and EU protected geographical indication (PGI) logos then that is what they will get."