Police said Banerjee's body was found hanging inside the party office. It was sent for postmortem as part of the investigation.
The incident triggered a gathering of supporters and local residents outside Banerjee's house and the party office in Rampurhat's Hattalapara neighbourhood.
Former minister in Mamata Banerjee government
Banerjee was a senior TMC leader who served as deputy speaker of the state Assembly during Mamata Banerjee's tenure as chief minister.
He had also held ministerial responsibilities in the state government, including the education and agriculture portfolios, after the TMC came to power for the first time.
Banerjee contested the latest West Bengal Assembly election from Rampurhat but lost to BJP's Dhruba Saha.
Stepped down from TMC district post
In June, Banerjee stepped down as chairman of the TMC's Birbhum district core committee. At the time, however, he said he would continue as a general member of the party.
His death comes at a time of significant political changes in West Bengal following the TMC's defeat after 15 years in power.
BJP makes gains in Birbhum
The BJP made significant gains in Birbhum in the latest Assembly election, winning six of the district's 11 constituencies.
This marked a sharp shift from the 2021 election, when the TMC had won 10 of the 11 seats in Birbhum and the BJP had secured just one.
Several former TMC leaders and MLAs are also facing corruption-related investigations and arrests, adding to the political upheaval following the party's electoral setback.
Police are investigating the circumstances surrounding Banerjee's death, with the postmortem expected to provide further details.