He was a widely known figure and veteran of Iranian politics, having been president for eight years from 1987.
The Islamic Republic News Agency announced Rafsanjani died after being taken to Tajreesh Martyres Hospital in northern Tehran earlier in the day.
Al Jazeera's Dosra Jabbari, reporting from Tehran, said Iranian officials described his death as a "huge loss" to the country.
At the time of his death, he was chairman of the Expediency Council, a political consultative body tasked with resolving disputes between parliament and the Guardian Council, a watchdog comprised of hard-line clerics and jurists.
Born in August 1934 in Iran's Bahreman, Rafsanjani was an influential politician, religious scholar and the confidant of Ayatollah Khomeini, the late founder of the Islamic Republic of Iran. Rafsanjani was a skilled behind-the-scenes operator in the labyrinthine world of Iranian politics.
Mr. Rafsanjani was jailed for several years for opposition to the reign of the USA -backed Shah Mohammad Reza Pahlavi and helped organize the network of mullahs that became Khomeini's revolutionary underground that eventually toppled the shah in 1979. Rafsanjani become one of Ahmadinejad's sharpest critics.
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He also caused a stir by saying in one of his memoirs - already a six-volume magnum opus - that Khomeini wanted to drop the mantra of "Death to America".
After serving a maximum two consecutive terms, Rafsanjani played an important role in the election of the reformist Mohammad Khatami, who succeeded him as president from 1997 to 2005.
In foreign affairs, he was considered a relative pragmatist, but he also showed no mercy to anyone who challenged his authority.
Rafsanjani had a long career as a revolutionary, but was also suspected of accumulating great wealth and influence in the process. In 2003, Rafsanjani was listed among Iran's "millionaire mullahs" by Forbes magazine. As recently as 2015, Rafsanjani said Israel will be "wiped off the map". Where Iran's supreme leader backed the continuation of a harsh, anti-Western ideological line, Rafsanjani pleaded for an update of the political system, bringing it on par with Iran's changing society.
His daughter Faezeh was arrested in 2012 on charges of "anti-government propaganda" during the 2009 vote.