The direct precursors of the A/Goose/Guangdong/1/1996 (GS/GD) virus lineage and its reassortants have been established geographically and ecologically. To investigate the variation and evolutionary dynamics of H5N1 viruses, whole-genome viral sequences (n = 164) were retrieved from the NCBI Influenza Virus Resource. Here, we present phylogenetic evidence for intrasubtype reassortments among H5N1 viruses isolated from China during 1996-2012. On the basis of phylogenetic analysis, we identified four major groups and further classified the reassortant viruses into three subgroups. Putative mosaic structures were mostly found in the viral ribonucleoprotein (vRNP) complexes and 91.0% (10/11) mosaics were obtained from terrestrial birds. Sequence variability and selection pressure analyses revealed that both surface glycoproteins (HA and NA) and nonstructural protein 1 (NS1) have higher dN/dS ratio and variability than other internal proteins. Furthermore, we detected 47 positively selected sites in genomic segments with the exception of PB2 and M1 genes. Hemagglutinin (HA) and neuraminidase (NA) are considered highly variable due to host immune pressure, however, it is not known what drives NS1 variability. Therefore, we performed a thorough analysis of the genetic variation and selective pressure of NS1 protein (462 available NS1 sequences). We found that most of positively selected sites and variable amino acids were located in the C-terminal effector domain (ED) of NS1. In addition, we focused on the NS1-RNA and NS1-protein interactions that were involved in viral replication mechanisms and host immune response. Transcriptomic analysis of H5N1-infected monkey lungs showed that certain PI3K-related genes were up-regulated.