Local people found the head of the 58-year-old deputy village chief in a fertiliser bag on a road in Narathiwat province with a hand-written note saying the beheading was in revenge for the deaths of Muslim protesters in army custody, officials said on Tuesday.
"A revenge for the innocents of Tak Bai district," an official quoted the note as saying in reference to the place where seven protesters were killed and 78 were suffocated or crushed in army trucks after their arrest.
The trunk of Ran Tulae was found on the same road 2km away an hour after the head was found, the official said.
Ran was the second Buddhist to be decapitated since violence erupted in Thailand's largely Muslim south in January. In May, a 67-year-old rubber tapper was beheaded at his plantation in Narathiwat.
The decapitation was the latest incident in 10 months of violence in the south near the Malaysian border in which nearly 450 people have been killed and the first murder linked directly to revenge for the deaths of the protesters.
Religious leaders and analysts had predicted Muslim outrage would trigger reprisals.
At least seven police and civilians have been killed in the past week since 1300 people were arrested for demonstrating outside a Narathiwat police station demanding the release of six men accused of handing government-issued weapons to insurgents.
Thaksin Shinawatra has been
criticised for his response
Most of the survivors of the 150km journey from the site of the protest to a barracks in crammed army trucks have been released.
But police charged 58 Muslims, most of them young men, on Tuesday with unlawful gathering and threatening officials. They face up to four years in jail.
Another 131 men were obliged to take a 42-day job training course at another military camp, police said.
The government of Prime Minister Thaksin Shinawatra has come in for severe domestic and international criticism for its handling of the 25 October incident.
Another violent government suppression in April was also followed by the beheading of an assistant village headman in Narathiwat.
On 28 April, police and soldiers killed 107 Muslims who attacked police posts in a failed attempt to seize firearms. At least 32 were killed inside a 16th century mosque in a massacre that angered Muslims worldwide.
Violence erupted again early this year, fuelled by feelings of many Muslims that they are subjected to discrimination in a predominantly Buddhist nation.