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7 year oldThe activist had been serving an 11-year prison term for "subversion" and was recently moved to a hospital for treatment for terminal liver cancer.
A university professor turned tireless rights campaigner, Mr Liu was branded a criminal by authorities.
The Nobel Committee said the "Chinese government bore a heavy responsibility for his premature death".
The campaigner was repeatedly jailed throughout his life. When not in prison, he was subject to severe restrictions while his wife, Liu Xia, was placed under house arrest.
Liu Xiaobo played a significant role in the Tiananmen Square student protests of June 1989, which ended in bloodshed when they were quashed by government troops.
He and other activists negotiated the safe exit of several hundred demonstrators, and have been credited with saving the protesters' lives.
He was subsequently placed in a detention centre and released in 1991.
Mr Liu's campaign to free those detained during the Tiananmen Square protests landed him in a labour camp in north-eastern China for three years, but he was permitted to marry poet Liu Xia there in 1996.
He was later freed, and continued to campaign for democracy.
The 11-year jail term he was serving when he died was handed down in 2009 after he compiled, with other intellectuals, the Charter 08 manifesto.
This was a call for an end to one-party rule and the introduction of multi-party democracy. Mr Liu was found guilty of trying to overthrow the state.
Mr Liu was a pro-democracy figurehead for activists outside mainland China, although many of his compatriots were unaware of his struggles because the authorities rigorously censored news about him.
The dissident won the Nobel Peace Prize in 2010 for his "long and non-violent struggle for fundamental human rights in China", but he was not permitted to travel to Norway to accept it.
He was the second person to receive the award while in prison - the other was the German pacifist Carl von Ossietzky, who won in 1935 while incarcerated in a Nazi concentration camp.
Love that survived a labour camp
By Carrie Gracie, China editor
Chinese authorities refused Liu Xiaobo's dying request to be allowed to travel abroad for treatment. Instead he died as he had lived, under the close watch of the one-party state.
The life and death of this Nobel laureate underline the cost of political defiance in China. Liu Xiaobo had enjoyed a comfortable early career as a university professor, but the massacre which followed the 1989 Tiananmen Square protests was the fork in his path.
Where many gave up demanding democracy, he stood firm and was jailed repeatedly.
When he won the Nobel Peace Prize in 2010, he was serving an 11-year prison sentence for subversion. A furious Beijing subsequently placed his wife under house arrest.
Only in a hospital ward in the last days of his life have this suffering couple been reunited, only to be parted again by his death.
In the weeks leading up to his death, Mr Liu's case became mired in international controversy. Several Western countries urged China to allow Mr Liu to leave the country to seek palliative care elsewhere.
A German and an American doctor who recently visited and examined him in a hospital in the north-eastern city of Shenyang both said he would be able to travel abroad. But Chinese medical experts insisted that he was too ill to travel.
Mr Liu's condition deteriorated shortly after he was admitted to hospital, according to Shenyang's First Hospital of China Medical University.
It said several days of anti-infection and blood treatment had failed to halt his decline, and in the days leading up to his death he had experienced organ failure and difficulty breathing on his own.
In a brief statement, Shenyang local officials said that Mr Liu had suffered multiple organ failure, and that efforts to save the activist had failed.
Liu Xiaobo memorialised in social art
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