Commander Tomas Borge Martinez, 81, was suffering from a lung condition that prompted doctors to place him in a medically induced coma, El Nuveo Diario reported Tuesday.
Borge served as a congressman and Nicaragua's ambassador to Peru and Ecuador.
He was among the nine Sandinista leaders who worked to overthrow the U.S.-backed dictatorship of Anastasio Somoza in 1979 and elect leftist Daniel Ortega.
Ortega and the Sandinistas were voted out of power in 1990 but returned in November winning a landslide election.
A national period of mourning was expected to be announced.