Lynagh, 48, was admitted to Royal Brisbane Hospital on Monday complaining of headaches and blurred vision.
Doctors were initially unsure of the illness that struck him down.
But a QRU statement released on Thursday says he suffered a stroke.
He is still in Royal Brisbane Hospital undergoing tests to determine the cause, the statement says.
Lynagh's former teammate Andrew Slack told ABC Radio the illness came as a shock to those who know him.
"There's not a lot known but he's stayed very fit since retiring some years ago," the former Wallaby captain said.
"I think this is a bolt out of the blue, there's no doubt about that."
Lynagh is regarded as one of the all time Australian rugby union greats, racking up 72 caps for Australia in the 1980s and 1990s as well as having a distinguished state career for Queensland.
He now lives in the UK but was visiting his home town when he fell ill.
A QRU spokeswoman said the Lynagh family requested privacy.
"The thoughts of the entire Queensland Rugby community are with Michael and the Lynagh family," she said.
