He died of cardiac arrest in the early hours of the morning, the government said in a brief statement.
His personal security chief Alfredo Malu had told AFP the former president fell ill last night.
Yala's personal physician and nephew Martinho Kope Na Nhanca said he could do nothing to save him. The ex-president died at 2:00am.
Yala's sudden illness prevented him from meeting with candidates in his Party for Social Renewal (PRS) who are campaigning ahead of presidential and parliamentary elections due on April 13.
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Groups of mourners and supporters gathered today in front of the heavily-guarded Bra hospital where his body was taken.
"He was a brave man who carried Guinea-Bissau in his heart," government spokesman Fernando Vaz said, announcing a three-day period of mourning starting tomorrow.
Born on March 15, 1953 to a family of peasant farmers in Pkon, a village near the northwestern town of Bula, Yala belonged to the Balanta ethnic group, the largest in the country, and passed some of his education in Portugal, the former colonial power.
When he turned to politics, he gained a reputation as a determined character who at first won the hearts of many of the people of Guinea-Bissau, which was born of a rebellion against the Portuguese and has since endured civil war.
Yala often sported a scraggly puff of chin hair and the red woollen hat, which Balante men are entitled to wear when they pass the highest Fanado initiation rite.
He was elected civilian president in 2000 in a country where the all-powerful army pulls many strings and which has in recent years become a hub for drugs trafficking between South America and Europe.