Serafinowicz, 86, had been charged with the murder of three unknown Jews in the 1940s on the Eastern Front.
But the case against him, which is believed to have cost pounds 4m, was abandoned following an eight-day hearing at which doctors gave evidence that he was probably suffering from the progressive and incurable Alzheimer's disease.
His former solicitor Ted Dancey said yesterday that he died on Thursday after being taken into hospital two months earlier. He said: "He goes to his grave sad that he didn't have the chance to prove his innocence."
Mr Dancey said his client's condition worsened after the death of his youngest son in April. His condition was frail throughout the two years of hearings and police investigations.
The prosecution said that Serafinowicz commanded the local police in the Mir area of Byelorussia in the winter of 1941/2, when many Jews were slaughtered, and that he played a leading role in the killings.
The murder counts were specimen charges designed to reflect a much greater scale of involvement in the murders of around 3,000 Jewish people in the area during the war.
The jury's decision that he was unfit to stand immediately cast a major question mark over future war crimes prosecutions in British courts.
Tory peer Lord Tebbit condemned the war crimes investigations as "a waste of the time of Parliament, the police and the judiciary and a colossal waste of public money which would have been better spent on caring for the people who suffered as a result of the Second World War".
Last night, however, Neville Nagler, director general of The Board of Deputies of British Jews said the death of Serafinowicz should not affect the hunt for Nazi war criminals. Despite the failure of the case, Mr Nagler said he believed criminal cases should go ahead if the evidence was strong enough.
He said: "He was discharged on the grounds of ill health and that decision has now been vindicated by his death.
"We will never know the truth of his activities in connection with possible war crimes."Reuse content