The actress was hospitalized in February just a few days after her 79th birthday with congestive heart failure, a condition she had been battling for a number of years.
Taylor died peacefully surrounded by her four children, publicist Sally Morrison said in a statement Wednesday.
Taylor's son Michael Wilding described his mother as an "extraordinary woman who lived life to the fullest, with great passion, humor, and love.
"Though her loss is devastating to those of us who held her so close and so dear, we will always be inspired by her enduring contribution to our world," Wilding said in a statement. "Her legacy will never fade, her spirit will always be with us, and her love will live forever in our hearts."
Taylor began her remarkable rise to stardom at the tender age of 10. Blessed with stunning beauty and obvious talent, her big break came one year later in the 1943 classic "Lassie Come Home."
By age 12, she had achieved full stardom for her striking performance in "National Velvet." Taylor captivated audiences with her grace, her poise and those amazing violet eyes.
Unlike other child stars, Taylor made an easy transition to adult roles. Throughout the 1950s she was teamed with some of Hollywood's most popular leading men, including Montgomery Clift in "A Place in the Sun."
In 1956, she received new acclaim when cast opposite Rock Hudson and James Dean in "Giant." In 1958 she co-starred with Paul Newman in "Cat on a Hot Tin Roof."
Taylor silenced critics of her acting ability by winning two Academy Awards for Best Actress. The first was in 1960 for her role in "BUtterfield 8."
At the age of 34, she won her second Oscar for her role in the blistering "Who's Afraid of Virginia Woolf?" opposite then-husband Richard Burton.
Most of Taylor's husbands were rich and powerful men, from hotel tycoon Conrad Hilton Jr. to actor Michael Wilding; producer Mike Todd, who tragically died in a plane crash; singer Eddie Fisher; Burton twice; and Sen. John Warner.
But Taylor's choice for her last husband was an unlikely one: unknown carpenter Larry Fortensky, whom she met while undergoing treatment at the Betty Ford Center.
The two married at Michael Jackson's Neverland Ranch. Taylor and Jackson shared a special friendship. Her last interview appeared earlier this year in Harper's Bazaar magazine.
Taylor spoke about her special connection to her fans, saying: "I love the idea of real feedback and a two-way street, which is very, very modern. But sometimes, I think we know too much about our idols and that spoils the dream."
Fans of Elizabeth Taylor gathered around her star near Hollywood Boulevard and Vine Street on Wednesday, mourning the loss of the legendary actress.
"She did so much in Hollywood. She represented class, she represented glamour, and it'll be a true loss to everyone in Hollywood," said Leron Gubler, CEO, Hollywood Chamber of Commerce.
For many fans, Taylor was the definition of what it meant to be a movie star.
"She had passion in her life, and a lot of people don't have that feel to live, and that's why I loved her and loved what she represented as an icon," said fan Maggie Pena.
"She was great for the industry and did a lot for television, for movies and we'll all miss her," said another fan, Peder Nelson.
As is custom, the Hollywood Chamber of Commerce marked Taylor's star with a wreath of flowers. Taylor's star on the famous Hollywood Walk of Fame was one of the originals to be installed in 1960.
"She's a legend. She's an icon. It's a very sad day for us that she's gone," said Anna Martinez with the Hollywood Chamber of Commerce.
A private family funeral was planned for later in the week.
The Associated Press contributed to this report.