Rai, aged 101, was suffering from various old age related ailments, they said.
He is survived by six sons and two daughters.
A recipient of the Karnataka Sahitya Academy award in 1969 and the national award the same year for the best teacher, Rai had penned books on various subjects, including theatre, language, biographies and also for children.
In 2005, he was conferred an honorary doctorate by Mangalore University, they said.
Rai was one of the campaigners for merging Kasargod district, which is now in Kerala and has a sizeable number of Kannadigas, into Karnataka and founded the 'Kasargod Merger Action Council' in 2002. He also supported formation of a separate 'Tulunadu' for the Tulu speaking population.