The Austrian had been battling health issues since mid-last year, including a lung transplant in August that required a two-month stay in hospital.
He was then hospitalised again for a short period at the beginning of 2019 after contracting a flu infection. There have been reports from Austrian press in the recent days that he had been receiving kidney dialysis in Switzerland.
Sadly, it has now been confirmed that he has succumbed to his ill health, passing away on Monday surrounded by family.
"With deep sadness, we announce that our beloved Niki has peacefully passed away with his family on Monday," his family said in a statement issued to Austrian media.
"His unique achievements as an athlete and entrepreneur are and will remain unforgettable, his tireless zest for action, his straightforwardness and his courage remain.
"A role model and a benchmark for all of us, he was a loving and caring husband, father and grandfather away from the public, and he will be missed."
Lauda was a giant of the Formula 1 paddock for well over four decades. He debuted in 1971, won his first race in 1974 after joining Ferrari, and then claimed a maiden title in 1975.
The following season he was lucky to survive a fiery crash at the Nürburgring, which left him badly burned. Remarkably he only missed two races, making one of the most remarkable comebacks in sporting history, and only missed out on the championship by a single point to McLaren's James Hunt.
The second title for Ferrari came in 1977, before Lauda moved to Brabham for the 1978 season. His stint there lasted less than two season, Lauda retiring from Formula 1 midway through practice for the 1979 Canadian Grand Prix.
He then focussed on his budding air charter business in Austria until 1982, when he made his Formula 1 comeback with McLaren. That relationship yielded a third World Championship two seasons later, when he beat teammate Alain Prost by just half a point.
Following his second retirement in 1985 there was a consulting manager role at Ferrari in the 1990s, which was followed by the team principal job at Jaguar, which he accepted in 2001, but only lasted until 2002.
In 2012 he became the non-executive chairman at the Mercedes F1 team, and was a key figure at the multiple title-winning squad right up to his illness of last year.