Shrestha had been on life support at a hospital in Kathmandu before dying at 3:15 a.m. Thursday, NepalNews.com said.
He was brought to Kathmandu from New Delhi Wednesday after he told his family he wanted to die in his own country.
Shrestha served as prime minister 1986 to 1990.
He was the last minister before protests led to the country's first democratic elections.
The government said it has decided to conduct a state funeral.