Friedman died of heart failure after being rushed to a hospital near his San Francisco home, his daughter, Janet Martell, told The Wall Street Journal.
"Milton's passion for freedom and liberty has influenced more lives than he ever could possibly know," said Gordon St. Angelo, the Milton and Rose D. Friedman Foundation's president and CEO, said in a statement. "His writings and ideas have transformed the minds of U.S. presidents, world leaders, entrepreneurs and freshmen economic majors alike."
In more than a dozen books and a column in Newsweek magazine, Friedman championed individual freedom in economics and politics.
His theory of monetarism, adopted in part by the Nixon, Ford and Reagan administrations, opposed the traditional Keynesian economics that had dominated U.S. policy since the New Deal. He was a member of Reagan's Economic Policy Advisory Board.
His work in consumption analysis, monetary history and stabilization policy earned him the Nobel in economics in 1976.
"He has used a brilliant mind to advance a moral vision — the vision of a society where men and women are free, free to choose, but where government is not as free to override their decisions," President Bush said in 2002. "That vision has changed America, and it is changing the world."
Friedman's death was announced during a conference in Washington at the Cato Institute, a libertarian think tank. The academics and policy makers in attendance observed several moments of silence, reports The Wall Street Journal.
Friedman favored a policy of steady, moderate growth in the money supply, opposed wage and price controls and criticized the Federal Reserve when it tried to fine-tune the economy.
A believer in the principles of 18th century economist Adam Smith, he consistently argued that individual freedom should rule economic policy. Outspoken and controversial, Friedman saw his theories attacked by many traditional economists such as Harvard's John Kenneth Galbraith.
In an essay titled "Is Capitalism Humane?" he said that "a set of social institutions that stresses individual responsibility, that treats the individual ... as responsible for and to himself, will lead to a higher and more desirable moral climate."