Transtroemer, who suffered a stroke in 1990 which affected his ability to speak, wrote poems full of imagery that addressed nature, history and death.
He has been called a master of mysticism, who often presented a dream-like consciousness in which time slows to allow for dissection of the relationship between the inner self and the surrounding world.
"Most of Transtroemer's poetry collections are characterised by economy, concreteness and poignant metaphors. In his latest collections... Transtroemer has shifted towards an even smaller format and a higher degree of concentration," the Nobel jury said when it honoured him.
The poet, who was also a trained psychologist, died on Thursday, according to the Nobel Foundation.
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"Saddened to hear of the loss of Swedish poet Tomas Transtroemer who passed away yesterday at the age of 83," the foundation tweeted.
Sweden's foreign ministry also took to Twitter, writing: "Sad news. Swedish poet and Nobel Prize winner Tomas Transtroemer has left us. But his words will never die."
"A human being's existence does not end where the fingers end," one Swedish critic said of Transtroemer's poems, which have been described as "secular prayers".
Transtroemer's reputation in the English-speaking world owes much to his friendship with American poet Robert Bly, who has translated much of the Swede's work into English, one of 60 languages in which his poems have appeared.
Born on April 15, 1931 in Stockholm, Transtroemer was raised alone by his mother after his father left them. He graduated in psychology in 1956 and later worked in an institution for juvenile offenders.
When he was 23 and still a psychology student, Transtroemer's first collection of poetry, "Seventeen poems" was published by Bonniers, northern Europe's most prestigious publishing house.