The activist had been serving an 11-year prison term for “subversion” and was recently moved to a hospital for treatment for terminal liver cancer.
A university professor turned tireless rights campaigner, Mr Liu was branded a criminal by authorities.
The Nobel Committee said the “Chinese government bore a heavy responsibility for his premature death”.
The campaigner was repeatedly jailed throughout his life. When not in prison, he was subject to severe restrictions while his wife, Liu Xia, was placed under house arrest.
Liu Xiaobo played a significant role in the Tiananmen Square student protests of June 1989, which ended in bloodshed when they were quashed by government troops.
He and other activists negotiated the safe exit of several hundred demonstrators, and have been credited with saving the protesters’ lives.
He was subsequently placed in a detention centre and released in 1991.
Mr Liu’s campaign to free those detained during the Tiananmen Square protests landed him in a labour camp in north-eastern China for three years, but he was permitted to marry poet Liu Xia there in 1996.
Liu Xiaobo was a Chinese literary critic, writer, human rights activist and Nobel Peace Prize laureate who called for political reforms and the end of communist single-party rule. He was incarcerated as a political prisoner in Jinzhou, Liaoning