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He died at 1310 (0610 GMT) after he slipped into a coma for the first time since being admitted. All six of his children were at the Jakarta hospital.
His condition had been fluctuating almost daily.
He left office in 1998 amid mass protests over corruption and human rights abuses under his long rule.
"Indonesia's second President Haji Muhammad Suharto has passed away at about 1310," senior police officer Major Dicky Sondani told reporters at the Pertamina Hospital in Jakarta.
Suharto was rushed to hospital on 4 January suffering from various heart, lung and kidney problems.
He had been living quietly in Jakarta since being overthrown during the 1997-1998 Asian financial crisis. He had been in and out of the hospital several times.
Although he was accused of embezzling huge sums from state funds during his three decades in power, his lawyers always successfully pleaded that his failing health meant he should not stand trial.
Indonesians often found it difficult to pin down what they felt about the man who had towered over their lives for so long, says the BBC's Jonathan Head.
But they certainly feared him, our correspondent says.
After all, the bloodshed which accompanied his rise to power, after a mysterious coup attempt in 1965 which he blamed on Indonesia's then-powerful Communist Party, was on a scale matched only in Cambodia in this region, he says.
Within the space of a few months at least half a million people were slaughtered in anti-communist pogroms that, at the very least, Suharto and the military tacitly encouraged.
The trauma of that period scars Indonesia to this day, and was a key tool in Suharto's armoury, says our correspondent.
(BBC)
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