Reddy, 80, had been undergoing treatment for neurology-related problems and the end came at 5 AM.
A sitting Rajya Sabha member from Andhra Pradesh, Reddy, served as Chief Minister from December, 1990 to October, 1992.
He served as state minister and legislator in his long political career spanning several decades.
It was during his tenure as Chief Minister ban on Naxals was first imposed and he survived an attack on his life by the extremists in 2007.
President Pranab Mukherjee and several senior leaders, including TDP Chief N Chandrababu Naidu, BJP leader M Venkaiah Naidu, Union Ministers M M Pallam Raju, Chiranjeevi, YSR Congress president Y S Jaganmohan Reddy, condoled the death of Reddy.
He is survived by wife and four sons.