Four men pretending to queue among the youngsters opened fire on Mongkol Traiyos, 25, the owner and ticket-seller of the elephant troupe, on Sunday, said police lieutenant-colonel Somsak Tangnapadon, the deputy investigative commander in Yala province.
The victim had said in an interview earlier this month that he feared for his safety because of an ongoing Muslim insurgency in Thailand's three southernmost provinces, but felt that his show would not be targeted.
The troupe was about to perform its afternoon show behind a mosque in the capital district of Yala, one of the three border provinces plagued by a Muslim insurgency. Lt-Col Somsak said Mr Mongkol was shot seven times and died shortly afterwards.
The suspects fled by motorcycle, he said, adding that he thought the attackers were "people trying to cause unrest in the area" - a phrase often used to describe Muslim insurgents in the south.
Mr Mongkol owned the Dok Din Troupe, which came from Chaiyaphum province, about 800 miles to the north-east.
He and his colleagues toured the most violent towns of the Muslim-majority south to entertain children with his elephants, which play football, do tricks and walk on two legs.
Police and soldiers had initially told Mr Mongkol not to go to the restive towns, but the villagers and headmen said it was safe, so the troupe went.
More than 1,500 people have been killed in near daily shootings and bomb attacks since violence the government blames on Islamic separatists flared in the southern provinces in January 2004.