Epstein, a convicted pedophile who befriended numerous politicians and celebrities over the years, was found unresponsive at the Metropolitan Correctional Center from "an apparent suicide", the US Department of Justice (DoJ) said.
The disgraced financier was discovered around 6:30 am (8:30pm AEST) and rushed to hospital in New York where he was pronounced dead, it added in a statement.
Attorney General Bill Barr said he was "appalled" to learn of Epstein's death and had instructed the justice department's inspector general to probe how he could have died while in federal custody.
"Mr Epstein's death raises serious questions that must be answered," Mr Barr said in a statement.
The FBI is also investigating the incident, said the DoJ.
The New York Times and other media quoted officials as saying Epstein hanged himself.
The city medical examiner's office confirmed Epstein's death but not what caused it.
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It came a day after a tranche of sealed legal documents were released for the first time providing new details about what prosecutors allege was Epstein's sex-trafficking operation.
The death also comes just over two weeks after the 66-year-old was found unconscious in his cell with marks on his neck after an apparent suicide attempt.
Epstein did not appear to be showing any visible signs of injuries when he appeared in court on July 31 following that incident, to be told that his trial wouldn't begin before June of next year.
'We need answers'
The wealthy hedge fund manager had been charged with one count of sex trafficking of minors and one count of conspiracy to commit sex trafficking of minors.
He was denied bail last month in a New York court because he was deemed a flight risk.
Epstein denied the charges and had faced up to 45 years in prison - effectively the rest of his life - if convicted.
The Metropolitan Correctional Center, a federal facility in Manhattan that is often used to house suspects awaiting or during trial, is considered one of the most secure penal establishments in the US.
The infamous Mexican drug trafficker Joaquin "El Chapo" Guzman spent more than two years there before being convicted and transferred to a federal prison in Colorado.
Epstein's death quickly raised questions about whether Epstein was in fact on suicide watch.
"We need answers. Lots of them," tweeted New York Congresswoman Alexandria Ocasio-Cortez.
Michael Bromwich, a former inspector general at the Justice Department, said an investigation must "determine who is responsible."
Republican Senator Ben Sasse, who heads the Senate's judiciary oversight committee, said the government had failed Epstein's alleged victims "yet again."
"These victims deserved to face their serial abuser in court," he said.
On Friday, two thousand pages of documents focusing on testimony by a victim who claimed she was a "sex slave" of Epstein were released by a New York court.
In them, Virginia Giuffre, now an adult, claims that she was forced to have sex with well-known American political and business personalities. They have all denied the allegations.
Prosecutors said Epstein sexually exploited dozens of underage teenagers, some as young as 14, at his homes in Manhattan and Palm Beach, Florida, between 2002 and 2005.
They claim that Epstein was "well aware that many of the victims were minors."
The girls were paid hundreds of dollars in cash to massage him, perform sexual acts and to recruit other girls, prosecutors allege.
They say Epstein had an army of recruiters, often not much older than their targets, who would approach vulnerable teens.
Epstein is also accused of paying off possible co-conspirators to "influence" them, US media have reported.
Epstein, whose friends have included President Donald Trump, former president Bill Clinton and Britain's Prince Andrew, was convicted previously of paying young girls for sexual massages at his Palm Beach mansion.
They have all denied knowing anything about his alleged crimes.
Epstein avoided federal prosecution under a plea deal that required him to admit to a single Florida state charge of soliciting prostitution from a minor and register as a sex offender.
He served 13 months in a county jail before being released in 2009.
Last month, Alex Acosta resigned as US labor secretary amid a backlash over the deal that he negotiated with Epstein in that case while he was a federal prosecutor in Florida.
Readers seeking support and information about suicide prevention can contact Lifeline on 13 11 14 or a local Aboriginal Health Service, Suicide Call Back Service on 1300 659 467 and Kids Helpline on 1800 55 1800 (up to age 25).
More information about mental health is available at Beyond Blue.