Mr Chavez had not appeared in public since he returned to Venezuela last month after cancer treatment in Cuba.
An emotional Nicolas Maduro made the announcement on Tuesday evening, flanked by leading Venezuelan political and military leaders.
Earlier, he said the 58-year-old Venezuelan leader had a new, severe respiratory infection and had entered "his most difficult hours".
He also announced the government had expelled two US diplomats from the country for spying on Venezuela's military.
Mr Maduro said Mr Chavez had died "after battling a tough illness for nearly two years".
He said he had no doubt that Mr Chavez's cancer, first diagnosed in 2011, had been induced by foul play by Venezuela's enemies.
Venezuelan radio reported that military had been deployed across the country.
Under the constitution, the head of Venezuela's Congress, Diosdado Cabello, will assume the interim presidency before an election is held.
Cuba surgery
One of the most visible, vocal and controversial leaders in Latin America, Hugo Chavez won the presidency in 1998 and had most recently won another six-year presidential term in October 2012.
Last May, the former army paratrooper said he had recovered from an unspecified cancer, after undergoing surgery and chemotherapy in 2011 and a further operation in February 2012.
However, in December 2012, he announced he needed further cancer surgery in Cuba, and named his Vice-President, Nicolas Maduro, as his preferred successor should the need arise.
Mr Chavez remained out of public view, finally returning to Venezuela in Februar
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