Prayers are being said in St Peter's Square, where many thousands of people are gathered to pay tribute.
Polish-born Karol Wojtyla became Pope in 1978, taking a conservative stand on issues like abortion and contraception.
He was the most widely travelled pontiff and visited more than 120 countries during his 26-year papacy.
Pope John Paul II died after suffering from heart and kidney problems and unstable blood pressure.
"The Holy Father died this evening at 21:37 in his private apartment," a brief Vatican statement said.
Procedures to be carried out in the event of the death of the Pope has been set in motion, it added.
His death was immediately announced to the crowds gathered on St Peter's Square, and was met with long applause, an Italian sign of respect.
Bells tolled across the city of Rome and many people wept openly.
"Our Holy Father John Paul has returned to the house of the Father," senior Vatican official Archbishop Leonardo Sandri said.
In the Pope's native Poland, people fell to their knees and wept as the news reached them.
His condition deteriorated suddenly on Thursday night with a high fever caused by an infection of the urinary tract.
The infection brought on "septic shock and a cardio-circulatory collapse", the Vatican said in a statement.
The Pope then received the Saint Viaticum, a Catholic rite for the sick and dying.
The Vatican had announced on Friday that though he was gravely ill he had been conscious, lucid and serene.
Millions of Catholics across the world gathered in churches and in the open air to pray for the Pope.
The pontiff had been suffering from breathing troubles, exacerbated by the progress of Parkinson's Disease, an incurable condition from which he had been suffering for nearly a decade.
He appeared briefly at the window of his Vatican apartment on Easter Sunday to bless the faithful, but was not able to speak.
It was the first time during his 26-year pontificate that the Pope had delegated the main Easter ceremonies to his cardinals.
* Read the full story in Monday's Northern Echo.
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