Wallace, 71, had been diagnosed with liver cancer. Ashley Wennerstrom, who provided a home for Wallace after he was freed Tuesday, said he died in his sleep Thursday night, The (New Orleans) Times-Picayune reported.
"He passed away in my home," Wennerstrom, program director at the Tulane University School of Medicine, said. "He was surrounded by friends and family and love in his last few days."
Wallace and Albert Woodfox, who remains in prison, denied killing Brent Miller, a guard at the notorious Louisiana State Penetentiary, commonly referred to as Angola Prison. They said prison officials targeted them because they founded the Angola Black Panther chapter.
Woodfox, Wallace and a third inmate who agreed to a plea deal became known as the Angola Three.
Wallace's lawyer said that shortly before his death Wallace said, "I am free, I am free." He said Wallace "had no hate in his heart."
A federal judge ordered Wallace's release, setting aside his conviction and ordering a new trial or dismissal of the charges. A grand jury in West Feliciana, La., handed up a new indictment Thursday, shortly before Wallace's death.