Monterroso - winner of Spain's Prince of Asturias literary prize - is credited with writing one of the world's shortest stories.
El Dinosaurio (The Dinosaur) reads in its entirety: "Upon waking, the dinosaur was still there."
He also wrote the critically acclaimed The Black Sheep and Other Fables, which has been translated into English.
The writer died of heart problems in Mexico City where he lived with his wife the Mexican author Barbara Jacobs.
Born in Tegucigalpa, Honduras, Monterroso was however a Guatemalan citizen.
He was exiled from Guatemala in 1944 for opposing the dictator Jorge Ubico and protesting against United States-owned banana plantations operating in Central America.
"He is one of the cleanest, most intelligent, transparent and smiling authors in the Spanish language," the Mexican writer Carlos Fuentes said of the writer when he won the Spanish literary award.
He also received the highest honour the Mexican Government can bestow on foreign dignitaries, the Aguila Azteca, in 1988.
Monterroso is survived by his wife, two daughters and five grandchildren.
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