The land has been used by the local people for cremations. It was recently acquired by the east coast railway authorities to build a railway line from Haridaspur to Paradeep.
"The labourers were thrilled when they saw a stone images of Hindu god Ganesha after digging out some five feet on the site," Harischandra Prusti, a noted Buddhist researcher of the locality, told IANS.
"The decapitated two-feet high statue of Ganesha has four hands," he said and added that the workers kept on digging and "discovered a three-feet high meditating Buddha statue, an ancient three-feet thick brick wall and many ceramic hoards.
"They also found some high framed tiny clay bowls, spout jars, terracotta lamps, many broken potteries, and some stones with inscriptions," Prusti said, and added, "The Buddha Vihar (monastery) might have been built during the 8th century AD."
After the discovery, local villagers rushed to the spot and stopped the digging. The villagers also informed the local administration requesting the authorities to take steps for the preservation of the site, he said.
Orissa has a host of ancient Buddhist sites - Ratnagiri, Udaygiri, Lalitgiri, Kuruma, Brahmavana, Langudi and Ganiapali.
Excavators have found large domes, monasteries, sculptures and other objects of archaeological importance at those sites.