Ms Mowlam, 55, who previously suffered a brain tumour, died at the Pilgrim's Hospice in Canterbury, Kent, at 8.10am.
Ms Mowlam had difficulties with her balance as a result of radiotherapy treatment for the tumour.
Earlier this month she fell and banged her head and never regained consciousness.
She was taken to King's College Hospital and was transferred last week to the hospice.
She had earlier asked not to be resuscitated and in the last few days food and water were withdrawn.
Family representative Brian Basham said: "Mo Mowlam passed away today at 8.10 am.
"Her family wishes to thank the many well wishers who have sent cards, messages and flowers and to say that, although, the funeral will be a private family occasion, there will be a memorial event in a few months.
"The family requests that flowers are not sent and suggests that, as an alternative, friends might like to make a charitable donation to the Pilgrim's Hospice, in 56 London Road, Canterbury, CT2 8JA."
Her death comes less than two weeks after former Foreign Secretary Robin Cook died.
Ms Mowlam - one of New Labour's most popular figures - stood down from the Commons at the 2001 general election after 14 years as an MP.
Tony Blair made her Northern Ireland Secretary when Labour swept to power in 1997 and she quickly made a name for herself as a down-to-earth and brutally honest operator.
She won widespread acclaim for her perseverance in working towards the Good Friday peace agreement the following year. Her achievements were all the more remarkable because she was recovering from treatment for the brain tumour at the time.
Renowned for her light-hearted disregard of formality, kicking off her shoes and chewing gum in meetings, she reputedly took her wig off to break tension in tense talks.
She took a particular political risk in 1998 by entering the infamous Maze Prison to speak to convicted paramilitaries when it became clear the peace process needed their backing.
Loyalist UDA/UFF prisoners had previously withdrawn their support. After her face-to-face talks with the prisoners, the paramilitaries' political representatives then announced they were rejoining the talks.
But there was growing opposition to her from more mainstream unionists. In 1999 she was replaced by Peter Mandelson and moved to become Cabinet "enforcer".
But her time in the post was marked by a steady stream of reports that someone in high places was briefing against her. There were also claims the Prime Minister had been angered when the Labour Party conference gave her a longer standing ovation than him.
She became even more outspoken after she stood down as an MP, saying it was "harder and harder to defend what the Labour Government is doing".
Ms Mowlam was born in Watford on September 18 1949 and nearly died of pneumonia three months later. Her father was an alcoholic and the family was invariably short of cash.
They moved to Coventry where she attended Coundon Court Comprehensive School before going on to study at Durham and Iowa universities.
Ms Mowlam worked as a lecturer and university administrator before being elected MP for Redcar in 1987. In 1995 she married Labour-supporting merchant banker Jon Norton - already a father of two.