It was announced in a brief statement on Thursday that Liu had suffered multiple organ failure and efforts to save him had failed.
Chinese Nobel Peace Prize-winning dissident Liu Xiaobo has died of liver cancer at a hospital in the northeastern city of Shenyang.
Liu, 61, was being treated for late-stage liver cancer. The Shenyang legal bureau said in a brief statement on its website that Liu had suffered multiple organ failure and efforts to save him had failed.
Liu was jailed for 11 years in 2009 for "inciting subversion of state power" after helping to write a petition known as "Charter 08" calling for sweeping political reforms.
He was recently moved from jail to the hospital to be treated for his cancer.
Liu becomes the first Nobel Peace Prize laureate to have died in custody since German pacifist Carl von Ossietzky, who passed away in a hospital while held by the Nazis in 1938.
Strict security at hospital
China had kept a tight control on information about Liu's case and imposed strict security at the hospital.
His friends, however, confirmed that Liu's family had been able to visit him.
Liu's wife Liu Xia has been under effective house arrest since her husband won the peace prize in 2010.
Rights groups and Western governments had urged China to allow Liu and his wife, Liu Xia, to leave the country to be treated abroad, as Liu had said he wanted to.
Earlier, the Shenyang legal bureau said in a statement on its website that signs Liu was unwell had been detected on May 31.
It said he was immediately sent to the hospital where he was being treated by eight well-known domestic cancer experts.
The legal bureau said the cancer had spread to other parts of his body.
Liu had a history of hepatitis B before entering jail, it said, citing prison records, and said he had regular medical checks in prison, which had not previously found signs of hepatitis or tumours.
Liu's friends had voiced suspicion over the hospital's statements, which suggested a worsening of his condition soon after two foreign doctors said he was well enough to travel abroad.
"We do not know how reliable these accounts are, or if they mean Liu Xiaobo cannot travel," a friend of Liu's family told Reuters, declining to be identified because of the sensitivity of the situation.
Two doctors from the United States and Germany who visited Liu on Saturday later said they considered it safe for him to be moved overseas for treatment.
After the doctors' Sunday statement, China released short videos of their visit, apparently taken without their knowledge, in which the German doctor appeared to praise the care Liu had received from the Chinese doctors.
On Monday, the German embassy in Beijing said in a statement the release of the videos went against Germany's wishes and suggested, "Security organs are steering the process, not medical experts."
Asked about Germany's statement, the foreign ministry on Tuesday said it did not know anything about the issues raised, reiterating its position that countries should not interfere in China's internal affairs.