People in the country's capital Pyongyang wept openly in the streets, while the rest of the world called for calm and South Korea put its military on high alert.
The so-called "hermit kingdom" will now be led by Kim's youngest son, Jong-un, who is aged in his 20s, was educated in Europe and is said to speak several languages.
In recent months he had accompanied his father on trips around the impoverished nation after being named as successor in September 2010.
But the late Kim's long pursuit of nuclear weapons and the military's repeated threats to South Korea and the US have stoked fears that war could again break out.
Even with a new leader in place, there have been some fears of a behind-the-scenes power struggle within the military.
Sky News' Asia correspondent Holly Williams, who has visited North Korea several times, said: "Kim Jong-un has been announced by state media as 'The Great Successor'.
"But the questions is, will he be able to hang onto that power with the iron grip that his father had?"
The North's official news agency said the country, people and military "must faithfully revere respectable comrade Kim Jong-un.
"We have to change sadness to strength and courage and overcome today's difficulties," it said.
In a special broadcast from the capital Pyongyang, state television said the man known as the 'Dear Leader' died on Saturday while travelling on a private train.
It added that he died of heart failure due to "great mental and physical strain" during a "high intensity field inspection".
Kim is believed to have suffered a stroke in 2008 but appeared relatively vigorous in video and photos from recent trips carefully documented by the country's media.
The man who reportedly had a taste for cigars, cognac and gourmet cuisine was also said to have suffered from diabetes and heart disease.
"It is the biggest loss for the party... and it is our people and nation's biggest sadness," said a weeping state TV presenter.
China, Pyongyang's key ally, said in a statement it was shocked by news of Kim's death and sends its "sincere regards" to the North Korean people.
Neighbouring South Korea has called for calm but put its military forces on "high alert".
The White House said in a statement: "The president has been notified and we are in close touch with our allies in South Korea and Japan.
"We remain committed to stability on the Korean peninsula, and to the freedom and security of our allies."
The late Kim took over North Korea in 1994 when his father and founder of the reclusive state Kim Il Sung, known as "the Great Leader", died.
Famed for his bouffant hairstyle, platform shoes and jump suits, Kim slowly emerged from his father's shadow to become one of the world's most enigmatic leaders.
Kim has been portrayed as a criminal mastermind behind deadly bombings, a jovial dinner host, a comic buffoon in Hollywood movies and by the administration of former US president George W Bush as the ruler of "an outpost of tyranny".
But despite being on the world stage longer than most leaders, little was known about him.
North Korean legend has it that Kim was born in 1942 on Mount Paekdu, one of the country's most cherished sites, a birth apparently heralded in the heavens by a pair of rainbows and a brilliant new star.
However, Soviet records indicate he was born in Siberia in 1941.
State TV said Kim's body will be placed in the Kumsusan memorial palace in Pyongyang and his funeral held on December 28.
Not much is known about his son's character but it is believed he has avoided Western influences despite receiving an education in Switzerland.
Kim's eldest son, Kim Jong-nam, aged in his late 30s, is believed to have fallen out of favour after he was caught trying to enter Japan on a fake passport in 2001, saying he wanted to visit Disney's Tokyo resort.
Very little is known about his other son, Kim Jong-chul, who is also aged in his 20s.
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