2 June 2011 Last updated at 17:30
The northern Manyara region police commander, Parmena Sumari, told the BBC his officers were searching for the killers of Sifael Jackson.
Tanzanian journalist Benny Mwaipaja told the BBC a gang allegedly ambushed Mr Jackson's car and killed him with spears, machetes and clubs.
The murder comes amid strong opposition to the government's promotion of big-scale farming.
"Mr Jackson was brutally killed and decapitated by a gang of about 15 people on Tuesday evening," Mr Mwaipaja told the BBC.
Some residents in the region accuse the government of threatening their livelihood by allocating land to big commercial farmers, including foreigners, he says.
But the government says its policy is aimed at boosting food production and ensuring that land is not under-utilised.
At least four farms have been invaded this year near Babati town in Manyara region, with fields torched and property destroyed.
Prime Minister Mizengo Pinda sent a high-level delegation of cabinet ministers to the region in February to investigate the conflict.
The delegation warned local communities that they would face arrest and prosecution if they failed to stop the attacks.
Mr Mwaipaja said the government was concerned that the violence would scare away foreign investors who it believed were helping Tanzania's "Green Revolution".
The government's campaign to promote large-scale commercial farming is a dramatic reversal of the socialist policies it advocated after independence.