Saunders, 74, had been suffering from infections, the San Francisco Chronicle reported. He died Friday at Kaiser-Permanente Medical Center.
A longtime fixture on the San Francisco music scene, Saunders continued to make appearances after his stroke, playing with one hand, although he was unable to speak.
"I never met anybody so happy who had a stroke," Mickey Hart, drummer with the Grateful Dead, told the Chronicle. "In the end, the only thing that lit him up was the music. Sometimes he'd cry, but I've never seen anybody so happy in the realm of music."
Saunders was born in San Francisco, where he attended high school with Johnny Mathis. He began playing organ professionally in 1957 after Army service.
In 1971, Saunders became part of an informal group centered at a Fillmore Street nightclub, The Matrix, which included Garcia on nights off from the Dead. The group became known as the Saunders-Garcia Band.
In addition to recording and touring, Saunders was the headliner at the Haight Street Music Festival for 24 years.