State-run RAI television, where Rossi worked as a sportscaster, said he had been diagnosed with an incurable illness.
Paolo Rossi, who fired Italy to victory in the 1982 World Cup after almost missing the tournament through a match-fixing scandal, has died aged 64, prompting an outpouring of grief and tributes.
"He didn't want to go, I hugged him tightly and told him 'Paolo you have suffered too much, now leave this body and go'," Rossi's wife Federica Cappelletti told journalists outside Le Scotte Hospital in Siena where he passed away.
Cappelletti had announced the death on Instagram, posting a picture of the couple with the caption “Per sempre," Italian for “Forever."
Rossi's funeral will take place on Saturday morning in the Cathedral of Vicenza, the city that changed the course of his footballing career and who reached Serie A thanks to his goals.
"This morning Vicenza woke up to the terrible news, Paolo Rossi, our honorary citizen, is no longer with us," town mayor Francesco Rucco said.
"We are trying to work out how to organise an event of this magnitude right now."
The city in the northeastern Veneto region will officially be in mourning until Saturday, with flags at half-mast, he said.
Cappelletti said a memorial service was planned for Vincenza and that Rossi's remains would be cremated, a decision she made in agreement with their children.
Paolo Rossi died today at the age of 64. The Italian strikers performance in World Cup ‘82 is still the stuff of legend. He scored six goals in the final three games of that tournament.— Sid Seixeiro (@Sid_Seixeiro) December 10, 2020
Tributes flooded in for 'Pablito', who was banned for three years for his part in the betting scandal, but returned to win the World Cup in Spain where he was the top scorer with six goals, and the Ballon d'Or winner the same year.
Goalkeeper Dino Zoff, who captained the 1982 winning side, described Rossi as an "extraordinary footballer, excellent teammate and friend."
Prime Minister Giuseppe Conte paid tribute to an "unforgettable champion", saying that his goals that summer "gave a dream to an entire generation."
"You will always remain our hero. Ciao Pablito," Juventus coach Andrea Pirlo, on the team which lifted Italy's fourth World Cup title in 2006, wrote on Twitter.
Rossi won the hearts of Italian fans when his goals propelled Enzo Bearzot's Azzurri, who started the tournament with three uninspiring draws, to a third world title.
But he almost missed the whole tournament.
In 1980, he was caught up in match-fixing scandal known as "Totonero" a play on the Italian for football pools, that also led to top teams including AC Milan and Lazio being relegated.
After protesting his innocence he was cleared to play again and was rehired by Juventus, going on to earn his spot in the World Cup squad.
Formidable Juve trio
A slight winger who converted to centre-forward, Rossi had an uncanny ability to be in the right place at the right time.
He scored a hat-trick in the 3-2 defeat of Brazil, a brace in a 2-0 semi-final win over Poland, and the opening goal in the 3-1 win over West Germany in the final.
Along with Christian Vieri and Roberto Baggio, Rossi holds the Italian record for nine goals scored in the World Cup.
Born in Prato in Tuscany, Rossi made his professional debut at Juventus in 1973, but his initial two-year spell at the Turin club was blighted by knee injuries.
His first successes were with Vicenza, helping the club into the top flight. However, following relegation he left for a loan spell at Perugia, where scandal struck.
After his suspension Rossi returned to Juventus, and the 1983-1984 season was his most successful at club level.
He formed a formidable trio with Michel Platini and Zbigniew Boniek and accumulated trophies, two Serie A titles, the Italian Cup, Cup Winners' Cups, and European Supercup.
Ti abbiamo ammirato in maglia azzurra, ti abbiamo abbracciato in maglia rossonera, il nostro ricordo per sempre al fianco del tuo dolce sorriso, ciao Pablito pic.twitter.com/QFcbd9wP9t— AC Milan (@acmilan) December 10, 2020
In 1985, Juventus won the European Cup amid the tragedy of the Heysel Stadium final against Liverpool, where 39 fans were killed. It was to be Rossi's last match with the 'Bianconeri'.
He went to rivals AC Milan for an unsuccessful season which was overshadowed by injury, as was his final year at Hellas Verona.
In a statement, Serie A president Paolo Dal Pino said the Italian league was in mourning.
“Paolo Rossi made us feel proud to be Italian," Dal Pino said, “he was the hero of all of us.”
In 1987, aged 31, Rossi decided to turn the page after nearly 400 league games and 154 goals, and 48 caps and 20 goals for Italy.
A father of three, Rossi later worked as a TV pundit.