We define a new concept of local states in the framework of algebraic quantum field theory (AQFT). Local states are a natural generalization of states and give a clear vision of localization in the context of QFT. In terms of them, we can find a condition from which follows automatically the famous DHR selection criterion in DHR-DR theory. As a result, we can understand the condition as consequences of physically natural state preparations in vacuum backgrounds. Furthermore, a theory of orthogonal decomposition of completely positive (CP) maps is developed. It unifies a theory of orthogonal decomposition of states and order structure theory of CP maps. Using it, localized version of sectors is formulated, which gives sector theory for local states with respect to general reference representations.