Palestinian groups have reacted with fury to the death in US custody of Abu Abbas, mastermind of the 1985 Achille Lauro cruise ship hijacking.
Abbas is being called a martyr by Palestinians
Abbas, leader of the Palestinian Liberation Front (PLF), apparently died of natural causes, US officials said.
He was convicted in absentia by an Italian court for the attack, in which wheelchair-bound American tourist Leon Klinghoffer was killed.
Abbas was captured in Baghdad last year by US special forces.
Palestinian leader Yasser Arafat led the tributes, issuing a statement describing Abbas as "an exceptional combatant and nationalist chief who devoted his life to serving his people and homeland."
The PLF accused the US of "assassination", alleging that Abbas, who suffered heart problems and high blood pressure, was denied access to medicines in the days before he died.
His widow, Reem Nimr, vowed to bury him on Palestinian soil.
"I accuse the Americans of having killed him since he died in their custody, either they killed him directly or they neglected him," she told the French news agency AFP at her home in Beirut.
A senior aide to Israeli Prime Minister Ariel Sharon called his death "poetic justice".
"The man who began his operation in Iraq as a proxy of Saddam Hussein...finds his death in a prison cell in Iraq under the control of the American forces," Raanan Gissin was quoted by the Associated Press as saying.
"I think this brings full circle the story, the saga, of the arch-terrorist called Abu Abbas."
Pentagon officials said that Abbas, who was in his mid-50s, had died on Monday, most likely of a heart attack; an autopsy will be performed.
Abbas was one of several PLF members who carried out the 1985 attack on the Achille Lauro, in an attempt to secure the release of 50 Palestinian prisoners being held in Israel.
Abbas described the killing of Klinghoffer as a mistake
The ship was seized while sailing between the Egyptian cities of Alexandria and Port Said.
During the two-day stand-off, the gunmen killed Klinghoffer, an elderly Jewish American man confined to a wheelchair, and threw his body overboard.
Klinghoffer's family said on Tuesday that Abbas' death had robbed them of justice for the killing: the one consolation was that he died in captivity.
After the stand-off, Egypt gave free passage to the hijackers in exchange for the rest of the hostages - many of them Americans.
But the plane carrying the hijackers to Tunisia was intercepted by US Navy jets and forced to land in Italy.
Abbas' co-conspirators were sentenced to long prison terms, but he was freed by the Italian authorities, who said they had insufficient evidence to detain him.
However, he was later convicted in absentia of masterminding the hijacking and received five life sentences.
Abbas reportedly spent around 17 years in Iraq before his capture there in 2003.
In 1996, he described the killing of Klinghoffer as a mistake.