His death gives an abrupt wrench to the turbulent politics of Africa's most populous nation, where army rulers have repeatedly promised and repeatedly delayed a return to democratic rule.
Nigeria exports almost two million barrels of crude oil a day. Prices made a small jump on world markets on news of Abacha's death but the effect was outweighed by doubts about the willingness of producer nations to restrain supplies.
Abacha seized power in 1993 during political turmoil after the military cancelled a presidential election in mid-count. He had been expected to transform himself into an elected civilian president in a one-candidate election planned in August.
A statement from chief of defence staff Major-General Abdusalam Abubakar said Abacha, 54, would be buried at his home city of Kano yesterday according to Muslim rites.
"General Sani Abacha passed away in the early hours of this morning... May his soul rest in peace." the statement said.
The statement did not give the cause of death. Western diplomats in Lagos, who heard the news before the official announcement, said it was a heart attack.
It was not immediately clear who would take charge of the nation of at least 104 million. Abacha's former deputy was sentenced to death in April for plotting to take power and never replaced.
Political tension was already running high in the run up to August 1 presidential elections, for which Abacha was the only candidate after his adoption by all five officially-approved political parties in April.
Abacha, who rarely appeared in public and kept to the tight security of his Aso Rock presidential villa in the capital Abuja, had not said he would run for the presidency.
But he had done nothing to stop supporters mounting a huge campaign on his behalf with the full backing of state agencies.
Abacha's transition to civilian rule, announced under pressure from home and abroad in 1995, had been criticised as undemocratic by both local opponents and Western countries that imposed limited sanctions to press for reform.
At least seven people died in opposition protests against Abacha's rule last month and more demonstrations were planned for the run up to elections despite the arrest of dozens of activists.
Growing unease over political developments had put pressure on the naira currency, which has lost at least 14 percent of its value against the dollar this year and contributed to falling share prices.
Opposition to military rule has centred on southwestern Nigeria since the annulment of the 1993 elections as local millionaire Moshood Abiola was poised to win. Abiola was detained in 1994 for declaring himself president.
Abacha was a northerner, like most of the soldiers who have ruled Nigeria for all but 10 years since independence from Britain in 1960.
The plight of dozens of political prisoners, including Abiola, has been a major sticking point in relations with Nigeria's former Western allies.
A possible extension of sanctions was threatened this year if Abacha did not improve his human rights record. But oil exports, which account for at least 95 per cent of foreign earnings, have not been targeted.
Born on 20 September 1943 in the northern state of Kano, Abacha was a career soldier, enrolling in the army as an infantryman at the age of 18 and attending military training colleges in the United Kingdom and United States as well as at home.
He became a familiar figure to Nigerians watching a succession of military governments come and go: When generals ousted the last civilian government in 1983, Abacha announced it on television.
Two years later, Abacha went on state-run TV to announce that dictator General Mohammed Buhari was being replaced by General Ibrahim Babangida.
Babangida would soon appoint Abacha his defence minister, and in 1993 he used his power to force Babangida's resignation amid the civil turmoil that followed the army's cancellation of civilian elections.
Babangida named a civilian government to rule in his place, but three months later Abacha was on television again, this time announcing that he had seized power himself.
Abacha's bloodless coup at first brought hope for relief from the civil strife that developed after Babangida refused to accept the outcome of 1993 elections that were to have returned Nigeria to civilian rule. But the continued detention of Moshood Abiola bore witness to the true nature of his regime.
Not even Wole Soyinka, winner of the 1986 Nobel prize for literature and a frequent government critic, was immune from Abacha's repression.
Tipped off that his arrest was imminent, Soyinka slipped out of Nigeria in 1994, saying the country was "retreating into the Dark Ages". That did not stop Abacha from charging him in absentia with treason, a crime punishable by death.
But no act drew such public condemnation as the 1995 hanging of environmentalist and playwright Ken Saro-Wiwa and eight other political activists convicted in a closed military tribunal of conspiring in the slaying of political opponents.
Critics said the charges were false, Abacha's revenge for Saro-Wiwa's challenges to the military government and his criticism of the environmental damage wrought by the oil industry.
The brazen brutality of the act stunned the world, coming even as the Commonwealth and South African President Nelson Mandela appealed for mercy.