The death was announced in a brief statement by doctors from Lilavati Hospital who had been treating him.
Shiv Sena supporters who had gathered outside Mr Thackeray's home broke down and tried to console each other.
Mr Thackeray had been unwell since July this year when he was admitted to Mumbai's Lilavati Hospital for breathlessness and constipation. He was released after a week in hospital, and was being nursed at his Bandra residence, Matoshree. The Sena chief was under constant medical supervision, with a team of doctors stationed at his home.
He is survived by his wife Mina and sons Jaidev and Uddhav, who is the executive president of the Shiv Sena, which Mr Thackeray founded in 1966.
His immediate family, nephew Raj Thackeray and the top leadership of the Shiv Sena were with him in his Bandra residence Matoshree in his last moments.
Security, already present in the area around Matoshree as well as Shiv Sena Bhavan, the party headquarters, has been stepped up again.
Mr Thackeray's health had dipped to very critical on Monday, but he made a recovery of sorts. Thousands of Shiv Sainiks had gathered outside Matoshree along with media crews. On Wednesday night at 2 am, Mr Thackeray's son Uddhav and grandson Aditya told party workers, "All efforts are on. Please pray."
Hundreds of policemen and paramilitary Rapid Action Force personnel had been called in on Wednesday night, with barricades to restrict movement around the area. Party workers began gathering at the Thackeray residence as news spread that the Shiv Sena chief's condition had deteriorated. Sources said top police officials of the city had been informed of Mr Thackeray's death in advance to give them time to make adequate security arrangements before a public announcement was made.
Many VIPs are expected to visit the Thackeray home to pay their respects. Actors Amitabh Bachchan, along with son Abhishek, and Sanjay Dutt had paid a visit late to Matoshree on Wednesday night.
Born in 1926 to Keshav Thackeray, a social reformer, Bal Thackeray began his career as a cartoonist with the English daily, The Free Press Journal. He worked there for six years before starting his own journal Marmik - which means poignant - in 1960. The journal became a launch pad for his entry into politics in 1966, when on Dussehra, Mr Thackeray announced his party, the Shiv Sena, at a huge rally held at the Shivaji Park in Dadar in central Mumbai.
The primary political agenda of Mr Thackeray's party was to attack what they called "outsiders" - then, Gujaratis and South Indians in Mumbai who Mr Thackeray accused of snatching jobs he claimed were meant for local Marathi-speaking people. The Sena countered widespread condemnation by calling it their fight for the sons-of the-soil or Marathi Manoos. Mr Thackeray would later similarly target north Indians.
Bal Thackeray soon built himself up to cult status. Unlike other khaki-clad leaders, he openly smoked pipes, wore sun-glasses and even drank beer - a sophisticated image that was in stark contrast to the growing hooliganism of his workers. Even his fiercest critics will not deny that Bal Thackeray was perhaps the most charismatic mass leader Maharashtra has ever seen. A master orator, his followers grew in numbers as he made vitriolic speeches pulling no punches when it came to attacking his political rivals. His supporters would wait all year long for the Sena's annual Dussehra rally to hear "Balasaheb" speak. He cultivated a larger-than-life persona without once holding any public office.
In 1984, the Shiv Sena and the BJP joined hands in Mumbai and Maharashtra to ride the Hindutva wave. Mr Thackeray had a sartorial makeover. Dressed in white or saffron robes, with a blazing tika on his forehead, Thackeray would sit on a massive silver throne. Two or three necklaces made of rudraaksh beads would add to the image.
The fallout of the Ram Janmabhoomi movement had caused tension across the country. Mr Thackeray used his party newspaper and mouth piece, Saamna, in which, on the eve of the Babri Masjid demolition on December 6, 1992, he wrote an incendiary editorial, "Towards Ayodhya". He is quoted as saying, "Now, no one can stop the construction of the Ram temple at Ayodhya. An ocean of millions of Ram devotees is surging to Lord Ram's Ayodhya. Our brave Shiv Sainiks are also joining in." It is still contested if Shiv Sainiks actually took part in the demolition. The CBI, however, named Mr Thackeray as one of the accused in the Babri demolition; it accused him of conspiracy.
Only months later, in 1993, communal riots tore Mumbai apart - some say forever. Over 1,000 Muslims were killed and the Sena was accused of playing an active role. Mr Thackeray was tried and acquitted in several cases but only for making hate speeches. His party claimed that had it not been for the Shiv Sena, Mumbai would have burnt even longer.
The Mumbai riots led to a deep polarization and the Sena-BJP alliance swept to power in 1995. Though Maharashtra was officially governed from its Secretariat - Mantralaya - in South Mumbai, Matoshree, the Thackeray residence in Bandra became the new power centre. Politicians, industrialists and actors were seen at the "Tiger's" beck and call; the King of Pop, Michael Jackson, had to meet and pose with Mr Thackeray to get clearance for his sole concert in India. It was this dominating influence over the city, without officially holding any position, that earned Mr Thackeray the nickname "remote-control."
Mr Thackeray was quoted around that time by the Asia Week as saying, "I am a great admirer of (Adolf) Hitler, and I am not ashamed to say so! I do not say that I agree with all the methods he employed, but he was a wonderful organizer and orator, and I feel that he and I have several things in common... What India really needs is a dictator who will rule benevolently, but with an iron hand."
But the honeymoon was short-lived. In 1999, the Sena-BJP government was voted out. Thackeray could not even vote - the Election Commission banned him from voting and contesting elections for six years as he had been found guilty of electoral malpractices. More electoral humiliation followed in 2004. The edifice had begun to crack. In 2006, Mr Thackeray's charismatic nephew Raj, broke away from the party over his uncle's succession plans. Son Uddhav was anointed the successor and his grandson too joined the party.
As his party's political fortunes declined - losing even the 2009 state elections - so did Mr Thackeray's health. In his last Dussehra rally speech this year, Mr Thackeray addressed a huge rally at Shivaji Park - from where at a similar rally he had launched his party in 1966 - by a taped video message. A frail Mr Thackeray, with folded hands shaking, asked his followers to support his son, Uddhav.
If there was any solace in his final days, it was the Sena's splendid victory in the 2012 Mumbai civic polls and also in the first signs of a patch-up between his son and estranged nephew.
There were flashes of the "Tiger" of yore till the very end. He warned recently that his Shiv Sena would disrupt the cricket tour that Pakistan will play in India in December this year. From his sickbed he wrote in the Saamna, "Even though I am lying indisposed on my bed, my blood does not allow me to sit silent when it comes to national interest. Hence, I am publishing this statement for my Hindu brothers with such intensity."
His admirers see him as the man who fought for the son of the soil, the Marathi manoos. And his critics, the man who sundered the city of dreams with his acidic politics. Either way, it will be very difficult to ignore the legacy of a man who started off as a cartoonist and was either caricatured by his opponents or revered by his supporters.
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