He was 93, family sources said.
The senior leader, who is the elder brother of present Maharashtra Governor Ch Vidyasagar Rao, is survived by wife and a son.
Rao hailed from Marpaka village of Vemulawada mandal in Karimnagar district and participated in Telangana's armed struggle against the Nizam.
He started his political career as a communist and was elected as a CPI legislator from Sircilla assembly constituency in Karimnagar in 1967, 1978, 1985 and 1994 assembly elections.
Subsequently, he quit the party and represented TDP from Sircilla seat till 2004 before he took retirement from active politics.
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Meanwhile, Telangana Chief Minister K Chandrasekhar Rao, Telangana Congress president Uttam Kumar Reddy, Leader of the Opposition in Telangana Assembly K Jana Reddy, Telangana BJP president and MLA K Laxman, Loksatta Party founder Jayaprakash Narayan condoled the death of the senior leader.
The Chief Minister ordered that the funeral of Rao be conducted with the police honours, an officials release said.
The funeral would take place tomorrow morning in Hyderabad, it said.
Rao, a great freedom fighter, dedicated his life for the welfare of the farmers, Jana Reddy said.