If you are sure that the reason he asked you out is for romantic reasons:
Go up to him in person and thank him for the gesture, and let him know you are flattered. Then, you can tell him that a relationship at work usually leads to problems. And, if it didn't work out between you two, then the two of you would end up seeing one other on a consistent basis at work, and that would make both of you uncomfortable. If it did work out, it could also cause a conflict of interest at work.
But, what are you going to do when there is a guy at work that you're interested in?
To stop this from making you look like a hypocrite, I'd tell him that you're already in a "light" relationship, and going on a date with him would complicate things. I'm sure he'll understand.
You don't need to feel uncomfortable around him. Try just talking to him about the usual stuff, and then you'd get to know him a little. Then try telling someone you know about him, maybe they'll hit it off, and your problem is solved.