The 39-year-old tribal leader, who represented Umerkote assembly constituency, was at Bola village in Naxal-hit Raighar area to distribute land pattas when the incident occurred, DGP Manmohan Praharaj said.
Four unidentified men shot dead Majhi and his PSO P K Patro, the DGP said.
Though the identity of the assailants was yet to be ascertained, the involvement of Maoists in the killing was suspected as the site was close to Maoist-hit areas of neighbouring Chhatisgarh, police said.
Majhi, a first time MLA, had been confined to a wheelchair after he was attacked by unknown people in 2004.
Condemning the killing as "brutal and savage," Chief Minister Naveen Patnaik has ordered investigation into the incident by the crime branch of police.
"The killing of Majhi and his security officer was brutal and savage. I am deeply shocked," Patnaik said.
Different aspects were being examined to ascertain the facts before the killers could be identified, police said.
The bodies of Majhi and his PSO, P K Patro have been taken to the Raighar Police Station and investigation was on, Nawarangpur SP Niti Shekhar said adding senior police officials had rushed to the spot.
Asked whether the killing took place due to intelligence failure, Chief Secretary B K Patnaik said investigation was on and it would be premature to make any conclusion at this stage.