The 85-year-old doyen of Telugu language had to his credit more than 80 publications, which include poems, songs, lyrical dramas, ballets, essays, travelogues, ghazals - original and in translation - and literary criticism.
"After he developed health complications he was shifted to a private hospital at around 3 am where doctors pronounced him dead," sources said.
He is survived by four daughters, they said.
Born on July 29, 1931 in Karimnagar district, the eminent writer and lyricist was the most distinguished Telugu poet of his generation. He was also the president of the Telangana Saraswatha Parishath.
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His works have been regarded as trend-setters. His research work on modern Telugu poetry assessing the influence of tradition and experiment on it became a classic since its publication in 1967.
He had nearly 3,500 film songs to his credit.
Telangana Chief Minister K Chandrasekhar Rao expressed condolences over Reddy's death.
Maharashtra and Tamil Nadu Governor C Vidyasagar Rao also expressed grief on Reddy's demise.
In a condolence message, Rao said, "I am deeply saddened and at a loss of words to know about the demise of Dr C Narayana Reddy, professor, poet, writer, Jnanapith awardee and former member of Rajya Sabha."
He was passionate about preserving and popularising Telugu language and culture, especially among the young generation. He also enjoyed mastery over English, Hindi and Urdu languages, Rao said.
"Dr Reddy was a fine human being, having friends cutting across the entire political spectrum. He also made his mark as a member of Parliament. I was privileged to have friendship with Dr Narayana Reddy.
"In his demise, the world of Telugu language and literature has lost a bright star. The void caused by his loss can never be filled," said the Governor.