Reed's UK literary agent, Andrew Wylie, confirmed the legendary musician passed away on Sunday morning in Southhampton, New York.
The US singer-songwriter underwent a liver transplant in May.
He initially found fame with rock band The Velvet Underground, who were inducted into the Rock and Roll of Fame in 1996 and their landmark debut album, The Velvet Underground & Nico, was added to the Library of Congress' registry in 2006.
Reed then embarked on a successful solo career and is best known for hits including 'Perfect Day' and 'Walk on the Wild Side'.
An outlaw in his early years, he would eventually perform at the White House, have his writing published in The New Yorker, be featured by the Public Broadcasting Service in an American Masters documentary and win a Grammy in 1999 for Best Long Form Music Video.
Reed is survived by his wife and fellow musician Laurie Anderson, whom he married in 2008.
Following the news of his death, a number of celebrities took to Twitter to pay their respects to the iconic singer.
Hollywood actor Samuel L. Jackson wrote: "R.I.P. Lou Reed. Just met at the GQ Awards. The music of my generation. Still Relevant!"
Jonathan Ross said: "RIP Lou Reed. A great talent, a nice man, a sad day."
Funnyman Ricky Gervais added: "RIP Lou Reed. One of the greatest artists of our time."