He was 80.
Israeli media reported that he died at Tel Aviv's Ichilov Hospital after a long illness.
Ben Eliezer, known affectionately by his original Arabic first name, "Fuad," was born in Basra, Iraq, in 1936 and moved to Israel in 1950.
He joined the Israeli military in 1954 and served as a commander in the Mideast wars that followed. He retired in 1984 with the rank of brigadier general and entered politics.
Ben Eliezer was a prominent member of the dovish Labor party and served in senior ministerial positions including defense, trade and communications.
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A native Arabic speaker, Ben Eliezer was on friendly terms with deposed Egyptian leader Hosni Mubarak and other Arab leaders and helped bridge gaps between Israel and the Arab world.
In Israel, he was known for his friendly demeanor, good relations with politicians across the spectrum and a reputation as a backroom negotiator. Last year, he was indicted for allegedly misusing funds.
Former President Shimon Peres, a longtime partner in the Labor Party, was among many Israeli leaders who expressed their sorrow over Ben Eliezer's passing.
Prime Minister Benjamin Netanyahu praised Ben-Eliezer for decades of service to the country and his "special character.
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