A Dada Saheb Phalke award winner, the 91-year-old acted in more than 250 films, including a few in Tamil.
Nageswara Rao had a lively chat with family members last night and passed away in his sleep, the legendary actor's son Nagarjuna, a popular hero, said.
He was rushed to the super-speciality Care Hospitals at Banjara Hills here in the small hours, where the doctors declared him dead.
Known for his strong will power and positive attitude, he himself declared his illness to the public last year and appealed to the fans to take it in their stride.
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The body of Nageswara Rao was kept at Annapurna Studios, established by him, to enable people to pay their last respects.
Rao, who had a stature on par with late N T Rama Rao, was one of the earliest stars of the black and white era.
Born in Krishna district of Coastal Andhra Pradesh, he started his career as a stage artiste and made his film debut in early 1940s with 'Dharmapatni', in which he acted as a woman.
He earned fame for his poignant portrayal of 'Devdas' in the film based on the novel of acclaimed Bengali author Sarat Chandra Chatterjee.
Rao played a pioneering role in shifting the Telugu film industry from Chennai to Hyderabad and established Annapurna Studios, named after his wife, which helped the cause in no small measure.