Sharon whose condition had worsened in last few days was in coma since 2006.
His relative confirmed that Sharon breathed his last at the Sheba Medical Center in the city of Ramat Gan in Tel Aviv district.
His family, including his sons Omri and Gilad, were with him during his final moments, The Jerusalem Post reported.
The Israeli prime minister's office will organise a state funeral for Sharon.
Israeli prime minister's office will organise a state funeral for Sharon.
Media from around the world has gathered at the hospital for the official announcement of Sharon's death, the Post report said.
The 85-year-old leader had been kept on life support in a hospital in central Israel for the past eight years and apparently suffered kidney failure.
Sharon, who became Israel's prime minister in 2001, orchestrated Israel's disengagement from the Gaza Strip enclave in 2005. But in December of the same year, he suffered a minor stroke, while presiding as Israel's Prime Minister.
On Jan 4, 2006, Sharon suffered another severe stroke. After receiving emergency treatment, he slipped into a coma and was replaced then by former prime minister Ehud Olmert from his center- left Kadima party.
(With IANS inputs)