Zakir Mumtaz, believed to be a resident of a village near Amritsar, was admitted to Jinnah hospital yesterday after he fell ill, sources said.
Mumtaz, 50, died of suspected cardiac arrest, the sources said.
However, they said the exact cause of death would be ascertained after an autopsy.
The Indian national was arrested on August 3, 2011 for allegedly crossing the border illegally.
He was held in a jail in Sheikhaupura before being sent to Kot Lakhpat jail in Lahore.