The Dublin TD, who had been battling with pancreatic cancer for over a year, left Government in February when Fianna Fáil lost the Irish General Election.
In a statement released by the party, the Lenihan family said his health had deteriorated in the last few months. The former minister had left hospital and died at home with his family at his side in the early hours of Friday morning.
President Mary McAleese is leading tributes to Mr Lenihan, who she said "had to confront challenges, the scale and gravity of which were unprecedented in the history of the State", when faced with the collapse of the Irish economy.
"Although we all knew he was battling serious illness, the untimely death of such a young and talented public servant is very distressing for all his family, friends and colleagues", Mr McAleese said.
"Despite his illness, he faced up to those challenges with extraordinary but characteristic dignity, courage and good humour. Brian's death is an enormous loss to public life in Ireland."
Fianna Fáil leader Micheál Martin described his former leadership challenger as, "quite simply, brilliant".
When Ireland was in the eye of the storm, Brian Lenihan never faltered. Day-in, day-out he continued to step up to the plate and he did not shirk his responsibilities.
Micheál Martin
"In a hugely volatile and rapidly evolving political and economic climate, Brian Lenihan was always cool and clear-headed in his decision-making."
Speaking at a meeting of the North South ministerial council in Dublin, Northern Ireland's First and deputy First Ministers paid tribute to a "true statesman".
Peter Robinson said: "Brian and I worked closely over recent years and got to know each other well. He was a true statesman and will be sorely missed."
Martin McGuinness said Mr Lenihan had played a major part in Irish political life.
"Even when ill, he continued to play a critical role in Irish politics over the past 18 months. His dedication and tenacity will not be forgotten", he said.
Mr Lenihan was elected to the Dáil in April 1996 in a by-election held following the death of his father, Brian.
He was part of one of the Republic's main political dynasties.
"His father Brian Lenihan Sr was Tánaiste, he also stood for the presidential election at one stage and didn't make it", UTV's Political Editor Ken Reid explained.
"His brother is Conor Lenihan, a TD who lost his seat in the last Dáil election. His aunt is Mary O'Rourke, one of the best known politicians in the Republic."
Speaking to RTÉ, Mrs O'Rourke, a former TD and Senator, spoke of her grief.
"It's all over. It's kind of unbelievable," she said.
"He always worked for his country and he worked for the best of Ireland and I suppose in the end what anybody in public life would wish to do, and that's what he did.
"I just feel my life has almost ended, I really do."
Mr Lenihan is survived by his wife, Patricia, their two children, his mother, and three brothers and one sister.