Britain's first and only female political leader passed away peacefully aged 87, after battling poor health for more than a decade.
After a minor operation over Christmas, Baroness Thatcher had spent the past few months recuperating at the five-star hotel in Central London.
The Iron Lady was given 24-hour care by nursing staff in her suite, after becoming too frail to stay in her Belgravia home.
The grocer's daughter, who became the longest serving British prime minister of the 20th century, will be honoured with a full ceremonial funeral - one step below a state funeral - at St Paul's Cathedral next week.
Not since Winston Churchill's death has a politician been granted such a tribute. His funeral was also held there in 1965.
Her spokesman Lord Bell said: 'It is with great sadness that Mark and Carol Thatcher announced that their mother Baroness Thatcher died peacefully following a stroke this morning'.
Her daughter Carol dashed from her home in the Alps to London on Sunday morning to be by her mother's side before she died.
The Queen was sad to hear of Baroness Thatcher's death and Her Majesty will send a private message of sympathy to the family, Buckingham Palace said today.
Prime Minister David Cameron said she had a 'lion-hearted love of this country' and 'fought for Britain's interests all the way'.
'We've lost a great leader, a great Prime Minister and a great Briton', he said.
'There were people who said she couldn’t make it, who stood in her way, who said that a woman couldn’t lead, and she defied them all.
‘Margaret Thatcher took a country that was on its knees and made Britain stand tall again. She was the patriot prime minister. When people said Britain could not be great again, she proved them wrong.
'She didn't just lead our country, she saved our country, and I believe she'll go down as the greatest British peacetime prime minister.
'Her legacy will be the fact she served her country so well, she saved our country and that she showed immense courage in doing so.
'And people will be learning about what she did and her achievements in decades, probably centuries to come. That's her legacy but today we must also think of her family.'
'She stands as an example to our daughters that there is no glass ceiling that can’t be shattered'.
When her funeral takes place, the streets between Westminster and St Paul's will be cleared for the procession, the date of which is yet to be decided'
Her coffin will be processed through the streets before her ceremonial funeral, which will be broadcast live on television.
Members of the armed services will line the route of Baroness Thatcher's funeral procession from the Palace of Westminster to St Paul's.
The day before the funeral the coffin will be transferred to the Chapel of St Mary Undercroft in the Palace of Westminster. There will be a short service following its arrival before the coffin rests in the chapel overnight.
The route from the Church of St Clement Danes will be lined by personnel from the RAF, Navy and Army before it is met at St Paul's by a guard of honour. Members of the armed services and pensioners of the Royal Hospital Chelsea will line the steps of St Paul's.
'At the church the coffin will be transferred to a gun carriage drawn by the King's Troop Royal Artillery. The coffin will then be borne in procession from St Clement Danes to St Paul's Cathedral. The route will be lined by tri-service military personnel.'
It is understood that Lady Thatcher was consulted about details of the funeral arrangements, and made clear that she did not want her body to lie in state.
Downing Street said: 'The service will be followed by a private cremation. All the arrangements being put in place are in line with wishes of Lady Thatcher's family.'
The Thatcher family has asked well-wishers to donate to the Royal Hospital Chelsea instead of leaving flowers.
Meanwhile, it has emerged that Parliament is to be recalled from its Easter recess early, on Wednesday this week, so MPs can pay tribute to Lady Thatcher.