Thatcher's spokesman, Tim Bell, said the former prime minister died from a stroke Monday morning at the Ritz hotel in London.
As flags were flown at half-staff at Buckingham Palace, Parliament and Downing Street for the 87-year-old, praise for Thatcher and her leadership poured in from around the world.
"Margaret Thatcher undoubtedly was one of the most remarkable political figures of the modern world," said Russian President Vladimir Putin.
Putin said Thatcher "made a significant contribution to the development of the Soviet-British and Russian-British ties, which we will always remember with gratitude."
President Barack Obama said many Americans "will never forget her standing shoulder to shoulder with President (Ronald) Reagan, reminding the world that we are not simply carried along by the currents of history. We can shape them with moral conviction, unyielding courage and iron will."
Queen Elizabeth II authorized a ceremonial funeral — a step short of a state funeral — to be held for Thatcher at St. Paul's Cathedral in London next week with military honors.
Prime Minister David Cameron cut short a trip to Madrid and Paris to return to Britain following news of Thatcher's death, and said Parliament would be recalled from recess on Wednesday so lawmakers could pay tribute.
For admirers, Thatcher was a savior who rescued Britain from ruin and laid the groundwork for an extraordinary economic renaissance. For critics, she was a heartless tyrant who ushered in an era of greed that kicked the weak out onto the streets and let the rich become filthy rich.
"Let us not kid ourselves. She was a very divisive figure," said Bernard Ingham, Thatcher's press secretary for her entire term. "She was a real toughie. She was a patriot with a great love for this country, and she raised the standing of Britain abroad."
Thatcher was the first — and still only — female prime minister in Britain's history. But she often found feminists tiresome.
Her boxy, black handbag became such a recognizable part of her image that her way of dressing down ministers and opponents became known as "handbagging."
A grocer's daughter, she rose to the top of Britain's snobbish hierarchy the hard way, and envisioned a classless society that rewarded hard work and determination.
She was a trailblazer who at first believed trailblazing impossible: Thatcher told the Liverpool Daily Post in 1974 that she did not think a woman would serve as party leader or prime minister during her lifetime.
But once in power, she never showed an ounce of doubt.
Thatcher could be intimidating to those working for her. British diplomats sighed with relief on her first official visit to Washington, D.C., as prime minister to find that she was relaxed enough to enjoy a glass of whiskey and a half-glass of wine during an embassy lunch, according to official documents.
Like her close friend and political ally Ronald Reagan, Thatcher seemed motivated by an unshakable belief that free markets would build a better country than reliance on a strong, central government. Another thing she shared with the American president: a tendency to reduce problems to their basics, choose a path, and follow it to the end, no matter what the opposition.
She formed a deep attachment to the man she called "Ronnie" — some spoke of it as a schoolgirl crush. Still, she would not back down when she disagreed with him on important matters, even though the United States was the richer and vastly stronger partner in the so-called "special relationship."
Thatcher was at her brashest when Britain was challenged. When Argentina's military junta seized the remote Falklands Islands from Britain in 1982, she did not hesitate, even though her senior military advisers said it might not be feasible to reclaim the islands.
She simply would not allow Britain to be pushed around, particularly by military dictators, said Ingham, who recalls the Falklands War as the tensest period of Thatcher's three terms in power. When diplomacy failed, she dispatched a military task force that accomplished her goal, despite the naysayers.
"That required enormous leadership," Ingham said. "This was a formidable undertaking, this was a risk with a capital R-I-S-K, and she demonstrated her leadership by saying she would give the military their marching orders and let them get on with it."
In deciding on war, Thatcher overruled Foreign Office specialists who warned her about the dangers of striking back. She was infuriated by warnings about the dangers to British citizens in Argentina and the difficulty of getting support from the U.N. Security Council.
"When you are at war you cannot allow the difficulties to dominate your thinking: you have to set out with an iron will to overcome them," she said in her memoir, "Downing Street Years."
"And anyway what was the alternative? That a common or garden dictator should rule over the queen's subjects and prevail by fraud and violence? Not while I was prime minister."
Thatcher's determination to reclaim the islands brought her into conflict with Reagan, who dispatched Secretary of State Alexander Haig on a shuttle mission to London and Buenos Aires to seek a peaceful solution, even as British warships approached the Falklands.
A private diary kept by U.S. diplomat Jim Rentschler captures Thatcher at this crisis point.
"And here's Maggie, appearing in a flower-decorated salon adjoining the small dining room (...) sipping orange juice and sherry," Rentschler wrote. "La Thatcher is really quite fetching in a dark velvet two-piece ensemble with grosgrain piping and a soft hairdo that heightens her blond English coloring."
But the niceties faded over the dinner table.
"High color is in her cheeks, a note of rising indignation in her voice, she leans across the polished table and flatly rejects what she calls the 'woolliness' of our secondstage formulation," Rentschler writes.
Needless to say, Haig's peace mission soon collapsed.
The relatively quick triumph of British forces revived Thatcher's political fortunes, which had been faltering along with the British economy. She won an overwhelming victory in 1983, tripling her majority in the House of Commons.
She trusted her gut instinct, famously concluding early on that Soviet leader Mikhail Gorbachev represented a clear break in the Soviet tradition of autocratic rulers. She pronounced that the West could "do business" with him, a position that influenced Reagan's vital dealings with Gorbachev in the twilight of the Soviet era.
It was heady stuff for a woman who had little training in foreign affairs when she triumphed over a weak field of indecisive Conservative Party candidates to take over the party leadership in 1975 and ultimately run as the party's candidate for prime minister.
She profited from the enormous crisis facing the Labour Party government led by Harold Wilson and later James Callaghan. Britain was near economic collapse, its currency propped up by the International Monetary Fund, and its once-defiant spirit seemingly broken.
The sagging Labour government had no parliamentary majority after 1977, and the next year it suffered through a "winter of discontent" with widespread strikes disrupting vital public services, including hospital care and even grave digging. The government's effort to hold the line on inflation led to chaos in the streets.
Britain seemed adrift, no longer a credible world power, falling from second- to third-tier status.
It was then, Thatcher wrote in her memoirs, that she came to the unshakable, almost mystical belief that only she could save Britain. She cited a deep "inner conviction" that this would be her role.
Events seemed to be moving her way when she led the Conservative Party to victory in 1979, with a commitment to reduce the state's role and champion private enterprise.
She was underestimated at first — by her own party, by the media, later by foreign adversaries. But they all soon learned to respect her. Thatcher's "Iron Lady" nickname was coined by Soviet journalists, a grudging testament to her ferocious will and determination.