Played by Patrick Dempsey, Derek, a brain surgeon, was married to Meredith Grey in the ABC drama. The death was met with shock by its fans on Twitter.
The development is said to be surprising as Dempsey, 49, had signed a two-year contract extension last year that would have kept him on Grey's through a 12th season, reported People magazine.
"Derek Shepherd is and will always be an incredibly important character - for Meredith, for me and for the fans. I absolutely never imagined saying goodbye to our 'Mcdreamy,' " creator/executive producer Shonda Rhimes said in a statement.
"His loss will be felt by all. Now, Meredith and the entire Grey's Anatomy family are about to enter uncharted territory as we head into this new chapter of her life. The possibilities for what may come are endless. As Ellis Grey would say ... The carousel never stops turning," Rhimes said.
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After helping victims of a car accident, Derek ended up getting into one himself and was taken to a hospital that didn't follow proper protocol to save him.
Twitter was flooded with the surprising turn in the story with many fans ranting about the loss of Derek.
"Been a loyal fan since day one and this just doesn't seem right that was the best they could do? #RIPMcDreamy #GreysAnatomy," wrote one fan.
"I wish I never started watching #GreysAnatomy bc it ruined my life (sic)," said another.
"I have a feeling therapists worldwide are going to make a fortune tomorrow. @shondarhimes #GreysAnatomy," said an user.