Merchant died at a London hospital Wednesday, surrounded by friends and family, a spokesman at Merchant-Ivory's London office said.
Indian television news reported that Merchant had been unwell for some time and recently underwent surgery for abdominal ulcers.
Bombay-born Merchant and Ivory, an American, made some 40 films together, including "A Room With a View," "The Remains of the Day," "Howards End" and "Heat and Dust."
Merchant generally served as producer, the business mind behind the collaboration, while Ivory directed.
The pair won six Oscars since their famous partnership began in 1961 with German-born screenwriter Ruth Prawer Jhabvala.
Their hits, especially E.M. Forster adaptations such as "Room With a View" and "Howards End," helped revive audiences' taste for well-made, emotionally literate period dramas.
In an interview with The Associated Press last year, Merchant said Merchant-Ivory films worked because they captured great stories.
"It should be a good story — speak about a time and place that is permanent," he said. "It should capture something wonderful with some great characters whether it's set in the past or in the future."
Merchant first traveled to the United States in 1958 to study for a business degree at New York University.
He met Ivory in a New York City coffee shop in 1961. Their first film together, "The Householder," was based on a novel by Prawer Jhabvala, and its 1963 premiere was held at the residence of then-U.S. Ambassador to India John Kenneth Galbraith.
"When we first began, Ruth told us she had never written a screenplay," Merchant told The AP. "That was not a problem since I had never produced a feature film and Jim had never directed one."
Merchant and Ivory departed in recent years from the flawlessly appointed period films for which they were famous.
They offered their take on French farce in 2003 with "Le Divorce," starring Kate Hudson and Naomi Watts.
They were also at work on "The Goddess," a musical about the Hindu goddess Shakti, starring a singing, dancing Tina Turner. Also to be released is "The White Countess," a period drama set in China and starring Ralph Fiennes, Vanessa Redgrave and Natasha Richardson.