She was 76.
Fallaci, who had been diagnosed with cancer years ago, died in a Florence hospital.
Last year Fallaci denounced Islam as "incompatible with democracy", and in the past she had been pursued by Italian authorities for her inflammatory comments.
The former war correspondent had split her time between New York and her hometown of Florence where she was quietly admitted to hospital several days ago.
During her career, she had met and interviewed many world leaders and celebrities.
But her 2002 book "The Rage and The Pride", published just after the September 11, 2001 attacks, caused a scandal for its anti-Muslim stance.
Last year, when she was already suffering from cancer, she controversially had an audience with Pope Benedict XVI at his summer residence in Castel Gandolfo even though she had described herself as an atheist Christian.