Doctors said she died of multiple organ failure at 7.45 a.m. at the Gauhati Medical College Hospital.
Known by her pen name, Mamoni Raisom Goswami, she had been a teacher at the Department of Modern Indian Languages at Delhi University.
Winner of India's highest literary award Jnanpith, Goswami acted as a peace broker between the outlawed United Liberation Front of Asom (ULFA) and New Delhi. But she gave it up in 2005.
"Her death has created a void in the literary scene in India," Assam Chief Minister Tarun Gogoi said.
The Assam government has decided to accord her a state funeral, which is likely Wednesday.
Her body will be taken from the hospital to her residence, after which it will be kept at a public playground for fans and well wishers to pay their last tributes.l here after prolonged illness.
The condition of 69-year-old Goswami, who suffered a cerebral stroke in February last, turned critical last night and she was declared dead at 7:45 AM, Guwahati Medical College Hospital Superintendent R Talukdar said.
The Jnanpith award winning writer was taken to a hospital in New Delhi earlier this year for further treatment but was brought back here in July and was undergoing treatment at the GMCH since then. She was in a paralysed state and on ventilator support.