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.
Mr Liu died "peacefully", surrounded by his wife and other relatives, a doctor who treated him said. His final words to Liu Xia were: "Live on well," the South China Morning Post reported.
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 their 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.