The former intelligence officer, who had suffered from prostate cancer, will be buried Monday, a foreign ministry spokesman said.
Al Megrahi's cousin Omer al-Gharyani said he was with al Megrahi at the Tripoli hospital when he died.
His death came more than two years after he was freed from a life sentence in Scotland on the grounds that he was dying.
The destruction of Pan Am Flight 103 over Lockerbie, Scotland, in 1988 in the deadliest act of air terrorism against Americans until the September 11, 2001 attacks on New York and Washington, according to the FBI.
American and British investigators who painstakingly pieced together the wreckage of the Pan Am 103 found it had been destroyed by a bomb, and they accused al Megrahi and another man of planting it.
Al Megrahi -- once the security chief for Libyan Arab Airlines -- and Al Amin Khalifa Fhimah were Libyan intelligence agents, the United States and Britain charged, indicting them in November 1991 on 270 counts of murder and conspiracy to murder.
The indictment set off the first of two international battles over al Megrahi. The first resulted in international sanctions and finally led to his trial and conviction.
The second came after he was released from a Scottish prison, on the grounds that he was diagnosed with terminal prostate cancer in August 2009 and was expected to have only a few months to live. He was sent home to Libya on "compassionate" grounds, and received a hero's welcome at the airport.
His release -- a little more than eight years after being sentenced to life in prison -- and the celebrations that greeted him in Libya sparked condemnation from the U.S. and British governments and some victims' families.
The fury grew as he lived long past the time doctors had expected him to survive. U.S. senators including Robert Menedez and Frank Lautenberg, both New Jersey Democrats, and Charles Schumer, a Democrat from New York, called for an investigation into why he was set free.
"This man was a horrible man," Schumer said Sunday in an interview with CNN. "It would have been better had he not died in freedom, but died in prison. That's what he deserved, and i still believe that the Scottish government, perhaps with the participation of the British government, created a major injustice when they let him out."
"The only legacy we have is in the memory of all those who were lost," Schumer added. "...We have to just make sure we continue this battle against terrorism on airplanes. We made great progress and we have to keep it up."
As rebels swept into Tripoli two years after al Megrahi's release, politicians on both sides of the Atlantic called for him to be extradited, with the Americans demanding a trial in the United States, and British lawmakers saying he should return to prison in Scotland.
CNN Senior International Correspondent Nic Robertson tracked al Megrahi down last year at the palatial villa Moammar Gadhafi had built for him during his reign as Libyan leader. Al Megrahi was apparently in a coma and near death. His family said al Megrahi's son and mother were trying to care for him with oxygen and an intravenous drip, but with no medical advice.
Al Megrahi's death may make it impossible ever to get the full story behind the Lockerbie bombing.
In an interview with Reuters last October, al Megrahi said the truth will come out "one day, and hopefully in the near future." He vowed that "new facts" would come to light.
When Washington and London accused him and Fhimah of responsibility for the attack, Libya refused at first to hand the men over. That prompted the United Nations Security Council in April 1992 to slap sanctions on the north African country, clamping down on arms sales and air travel.
The FBI put the two on its 10 Most Wanted Fugitives list -- the only time officers of a foreign government have ever been named on the list, as far as the FBI knows, spokesman Ken Hoffman said.
Two years later, Libya floated the idea of trying the men in an international court, which the United States and Britain rejected.
In the summer of 1998, Libya made a fresh proposal: that the men face justice in the Netherlands under Scottish law.
By the end of the year, matters came to a head when Kofi Annan, then U.N. secretary-general, met Gadhafi in Tripoli. Ten days later, a U.S. Appeals Court ruled that the families of the 189 Americans killed in the bombing could sue Libya for its possible role in sponsoring in the attack.
Libya agreed the next day to let the men face trial.
They were handed over on April 5, 1999, to the United Nations, which suspended its sanctions the same day.
The handover helped break a long-running standoff between the United States and Libya.
Two months later, American and Libyan officials met face-to-face for the first time in 18 years, and al Megrahi and Fhimah made their first court appearance before the end of the year.
The trial lasted nine months. In 2001, al Megrahi was convicted of the murders after prosecutors dropped lesser charges, and was sentenced to life in prison, having to serve a minimum of 27 years. Scotland does not allow the death penalty.
Fhimah was found not guilty.
Al Megrahi always insisted he was innocent, and filed one appeal after another against his conviction. The first was rejected in 2002.
Relations between the United States and Libya improved swiftly.
Libya agreed in 2003 to pay $2.7 billion in compensation to the families of the bombing victims, though Gadhafi always remained cagey about admitting official Libyan involvement in the bombing.
For his part, al Megrahi continued to fight to clear his name.
In June 2007, the Scottish Criminal Cases Review Commission allowed am fresh appeal, ruling that it had uncovered new evidence and that al Megrahi "may have suffered a miscarriage of justice."
Before the appeal could be heard, however, it emerged that al Megrahi had terminal prostate cancer.
Scottish Justice Secretary Kenny MacAskill ordered him freed on compassionate grounds in August 2009. MacAskill had authority over al Megrahi's case because the convicted bomber was jailed in Scotland. Al Megrahi dropped his appeal when he was freed.
The release proved immediately controversial.
Some family members of Lockerbie victims complained that with the legal process ending when al Megrahi dropped his appeal, they would never know the full truth about the bombing.
The British press, meanwhile, alleged the release was tied to oil deals with Libya.
British and Scottish officials denied the claim, and released more than 100 pages of previously secret documents to make their case.
The papers included a handwritten letter from al Megrahi to MacAskill, pleading to be allowed to see his family before he died, and continuing to proclaim his innocence.
The documents also showed that senior Libyan officials warned their Scottish and British counterparts it would be "catastrophic" for British-Libyan relations if al Megrahi died in prison.
When Al Megrahi returned to Libya on August 20, he was accompanied by Gadhafi's son, Saif al-Islam.
The younger Gadhafi confirmed that Libya was "very angry" at British efforts to keep al Megrahi out of a separate prisoner transfer agreement, but said ultimately, the bomber was released for a different reason anyway.
It "was based on the compassionate grounds, not because of business deals," he said in early September. "The guy is sick, seriously sick. He has cancer and because of that they made their decision and I think it was the right decision. Very simple."
Source: CNN News
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