His died at a hospital in Gurgaon at 3.30pm following multi-organ failure. He was admitted to the hospital on November 19 with lung infection.
He is survived by two sons — Naresh, a Rajya Sabha MP and Akali Dal leader, and Vishal. His wife, Sheila Gujral, died in 2011.
Parliament was adjourned after home minister Sushilkumar Shinde made the announcement. The government announced a seven-day state mourning.
PM Manmohan Singh said, "As Prime Minister, he set an example of grace under pressure, of composure in difficult circumstances and of steadfastness to principles."
Congress chief Sonia Gandhi hailed Gujral for his sagacity and deep understanding of national and international affairs.
The first Punjabi PM had propounded the 'Gujral Doctrine' of five principles for maintaining good neighbourly relations that became the hallmark of his policy of friendly relations with countries in South Asia.
As an external affairs minister, he restored India-Bangladesh relations with the Ganga Waters agreement, rebuilt the structure of dialogue with Pakistan and initiated the negotiations on the historic India-Sri Lanka free trade agreement.