Dr. David Acheson, the Food and Drug Administration's food safety chief, called the finding a key breakthrough in the case, as did another health official.
"We have a smoking gun, it appears," said Dr. Lonnie King, who directs the center for foodborne illnesses at the Centers for Disease Control and Prevention.
Acheson said the farm is in Nuevo Leon, Mexico. Previously, the FDA had traced a contaminated jalapeno pepper to a farm in the Mexican state of Tamaulipas. Both farms shipped through a packing facility in Nuevo Leon, raising the possibility that contamination could have occurred there.
The FDA advised consumers to avoid raw serrano peppers from Mexico, in addition to raw jalapeno peppers from Mexico, and any foods that contain them.
In a statement Wednesday, Mexico's Agriculture Department said it "rejects" the FDA's conclusion that the source of the salmonella outbreak had been located in the Mexican farm's irrigation water.
"The farm unit in question ended its harvest more than a month ago, so the sample they say they have lacks scientific validity" because the sample "was taken recently from a tank holding rain water that was not used in production," the statement said.
"The government reiterates its call for the FDA to use information responsibly and, above all, to base it on scientific evidence," the statement concluded.
Acheson and other officials were grilled at a congressional hearing about why the investigation originally focused on tomatoes. Industry representatives complained that they have lost more than $300 million and had to dump tons of perfectly good tomatoes they could not sell because of government warnings. The probe was slowed even more because FDA investigators were unfamiliar with the workings of the tomato industry and were reluctant to share information, they said.
"For weeks and weeks, investigators were on the trail of the wrong product," Thomas Stenzel, president of the United Fresh Produce Assn., told the House Agriculture Committee.
But federal officials insisted that tomatoes still cannot be ruled out and that it is quite possible the outbreak was caused by several different kinds of contaminated produce.
"I don't think we can say that (tomatoes) were needlessly dumped," Acheson told reporters after the hearing. "The early part of the investigation clearly implicated tomatoes."
The outbreak has sickened more than 1,300 people since April.
Tomatoes had been the prime suspect in the nationwide outbreak for weeks. But last week, the FDA said only jalapeno peppers grown in Mexico were currently implicated in the nationwide salmonella outbreak. The FDA said then it had found the same strain of salmonella responsible for the outbreak on a single Mexican-grown jalapeno in a south Texas produce warehouse. The agency explained that any contaminated tomatoes would be out of the food supply chain by now.
For now, the focus of the investigation is on the two farms in Mexico, which Acheson said are quite far from each other.
The Tamaulipas farm also grew tomatoes and peppers, said Acheson. But the tainted pepper traced to that farm was found at a warehouse facility in McAllen, Texas, raising the possibility it could have been contaminated along the way. Acheson said samples have been taken from the Tamaulipas farm, and lab results are pending.
The Nuevo Leon farm did not grow tomatoes.
Lawmakers are considering a range of reforms to prevent future outbreaks and speed their investigation. These include improving communication between investigators and the industry, imposing standards for good agricultural practices and improving traceability.
"You could describe our current food safety system as 'outbreak roulette,"' said Rep. Dennis Cardoza, D-Calif., chairman of the subcommittee holding the hearing. "One spin of the outbreak wheel, and your industry may be bankrupt, your loved ones sickened."