The 79-year-old died in hospital in New Delhi after being admitted on December 24 suffering from a respiratory illness, a hospital official told AFP.
He is expected to be succeeded as chief minister by his daughter Mehbooba Mufti, current head of the moderate People’s Democratic Party (PDP) that he founded in 1999.
The veteran leader took over as chief minister of Jammu and Kashmir state for the second time last March, after serving in the same role between 2002 and 2005.
He was appointed India’s first Muslim home minister in 1989, and later the same year another of his daughters was kidnapped by Kashmiri militants. She was later released in exchange for five jailed rebels.
“Mufti Sahab’s demise leaves a huge void in the nation & in J&K, where his exemplary leadership had a major impact on people’s lives. RIP,” Prime Minister Narendra Modi tweeted, using an honorific denoting respect.
Sayeed’s PDP controversially went into coalition in the restive Himalayan region with Modi’s Hindu nationalist Bharatiya Janata Party after state elections last year.
Several rebel groups have for decades been fighting Indian forces deployed on the Indian side of divided Kashmir, seeking independence or a merger of the territory with Pakistan.
The fighting has left tens of thousands dead, mostly civilians.
The region is divided between India and Pakistan, both of which claim the Himalayan territory in its entirety.