Andreas Liveras, 73, had earlier spoken on his mobile phone of how he and other guests were locked in the basement of the five-star Taj Palace hotel after it was stormed by terrorists.
Mr Liveras, who was ranked 265 in the Sunday Times Rich List with a fortune of 315 million from wholesale food and yachts, was said to have suffered several gunshot wounds and was pronounced dead on arrival at St George's Hospital.
A family member in Cyprus told The Scotsman: "We're a large extended family and we're all in shock. I haven't spoken to any of his four children yet, but I heard they are all devastated."
Last night, Mr Liveras's brother claimed that he could have escaped death if he had been carrying his Cypriot passport.
"But he never took it with him," his brother, Theophanis, said.
The terrorists had separated British and American passport holders and chose six to shoot, he said.
Mr Liveras's British assistant, who has not been named, was one of the hostages singled out for cold-blooded execution, but he managed to escape despite suffering two gunshot wounds. He was being treated for serious wounds in hospital last night.
The assistant called Mr Liveras's family in England to alert them to his plight without knowing his fate.
Theophanis, who lives in Nicosia, Cyprus, promptly called Liveras's mobile phone, which was answered by an Indian woman who stunned him by shouting: "He's been shot."
A Cypriot foreign ministry official, Phaedonas Anastasiou, said: "He was executed in cold blood, and he was carrying a British passport."
Before his death, Mr Liveras had described the chaos in a telephone interview recorded as he and others were still in one of the buildings. "All we know is the bombs are next door and the hotel is shaking every time a bomb goes off," he said.
Before he was killed, the self-made millionaire, who emigrated to Britain from Cyprus, told the BBC he was with more than "a thousand people living on their nerves".
He said he had visited the Taj Palace hotel for a curry after hearing it served the best food in Mumbai. "I think it's got the best restaurant here, but as soon as we sat at the table, we heard the machine-gun fire outside in the corridor.
"We hid ourselves under the table and then they switched all the lights off. But the machine-guns kept going, and they took us into the kitchen, and from there into a basement, before we came up into a salon where we are now.
"There must be more than 1,000 people here. There are residents and tourists and locals. We are not hiding, we are locked in here – nobody tells us anything, the doors are locked and we are inside."
The Cypriot foreign ministry said Mr Liveras had gone to India on business. He was in Mumbai for a yacht show, family members said.
Mr Liveras's story is a classic rags-to-riches tale. After his family moved to London in 1963, he worked as a bakery deliveryman for a patisserie in Kensington. Within five years, he had bought the company.
Another British entrepreneur, Sir Gulam Noon, known as Britain's curry king, spoke yesterday of how he escaped the attack. He booked a table, but opted to order room service.
"He said the restaurant was the first place that the terrorists went to."