Taylor, Oscar winner for her portrayals of a call girl in "Butterfield 8" and a shrewish wife in "Who's Afraid of Virginia Woolf?," was surrounded by her four children when she died, the family said in a statement.
Taylor entered Cedars-Sinai Medical Center in Los Angeles six weeks ago for treatment of congestive heart failure.
"My mother was an extraordinary woman who lived life to the fullest, with great passion, humor and love," son Michael Wilding said in a statement. "Though her loss is devastating to those of us who held her so close and so dear, we will always be inspired by her enduring contribution to our world."
Her family was "incredibly proud" of Taylor's work in film, business and advocacy in the fight against HIV/AIDS.
"We know, quite simply, that the world is a better place for mom having lived in it," the statement said. "Her legacy will never fade, her spirit will always be with us and her love will live forever in our hearts."
The voluptuous, violet-eyed Taylor was more renowned for her beauty, jewels, wardrobe, lovers and husbands than her acting talent. Nonetheless, her talent on the screen earned her five Oscar nominations.
Taylor's personal life was as well known as her acting abilities, marked by eight marriages to seven men, including two stormy marriages with actor Richard Burton, her co-star in several films, including the epic "Cleopatra."
Taylor's health issues included a fall from a horse during one of her early films, bouts with pneumonia and skin cancer, a tracheotomy, treatment for alcohol and painkiller addictions, and lung, hip, brain and heart surgeries, ABC News said.
Taylor, born in London to American parents, burst into films at age 12 in the 1944 box office hit "National Velvet." She won acclaim as an adult with 1951's "A Place In the Sun."
Taylor also was credited with drawing world attention to HIV/AIDS with her fund-raising and activism, raising and donating millions to the cause, founding the American Foundation for AIDS Research and The Elizabeth Taylor AIDS Foundation.
She spearheaded a successful line of perfume and jewelry. In 1999, Taylor was appointed dame commander of the Order of the British Empire.
Taylor is survived by her four children, 10 grandchildren and four great grandchildren.
A private family funeral will be conducted late this week, the family said in a statement. In lieu of flowers, the family asks that contributions be made to the Elizabeth Taylor AIDS Foundation. People wanting to send personal messages can log onto http://www.facebook.com/pages/Elizabeth-Taylor-Tribute.