She was 77 and leaves behind a son and a daughter, family sources said.
Fabi Basheer was admitted to a private hospital two days ago following respiratory problems.
Known as 'Sultan of Beypore' Basheer's 'Bayakalasakhi', 'Pathummayude Aadu' and 'Mathilukkal' were some of his well known works with two of them being made into films.
The funeral is expected to be held tomorrow.