Fawcett died in hospital surrounded by friends and family shortly before 9.30am on Thursday (0230 AEST on Friday), reports said.
"After a long and brave battle with cancer, our beloved Farrah has passed away," O'Neal said in a statement released by Fawcett's publicist Arnold Robinson.
"Although this is an extremely difficult time for her family and friends, we take comfort in the beautiful times that we shared with Farrah over the years and the knowledge that her life brought joy to so many people around the world."
O'Neal told People magazine's online edition he had talked to Fawcett through the night.
"She's now with her mother and sister and her God. I loved her with all my heart. I will miss her so very, very much. She was in and out of consciousness. I talked to her all through the night.
"I told her how very much I loved her. She's in a better place now."
Speculation that Fawcett's death was close at hand had mounted after veteran ABC television interviewer Barbara Walters said the actress had been given her last rites earlier on Thursday.
Reports said O'Neal and Alana Stewart were at Fawcett's bedside when she passed away at St John's Hospital in Santa Monica.
Earlier this week, O'Neal revealed he planned to marry Fawcett, who has been battling cancer for three years. "I've asked her to marry me, again, and she's agreed," O'Neal said.
O'Neal, 68, and Fawcett had been romantically involved off-and-on since 1982. The couple had a son together, Redmond, but never married.
Redmond O'Neal is in jail in California for drug offences and was not at his mother's bedside when she died but spoke to her on the phone before her death, his father told People.
Fawcett's son told her "how much he loved her and asked her to please forgive him that he was so very, very sorry," Ryan O'Neal was quoted as saying.
Fawcett emerged as a pop-culture icon in the 1970s and 1980s after her role in Charlie's Angels and appearance in a famous poster wearing a red swimsuit that would come to be her defining image.
During the 1970s, Fawcett was married to Six Million Dollar Man star Lee Majors, from whom she separated in 1979. In 1982 she began a long romance with actor O'Neal and the couple had Redmond in 1985.
After splitting from O'Neal in the 1990s, Fawcett faded from view, although she appeared in Robert Altman's 2000 comedy, Dr T and the Women, in an ensemble cast that included Richard Gere, Helen Hunt, Laura Dern and Kate Hudson.
In recent years, Fawcett's health was the subject of intense scrutiny by a voracious tabloid media.
News of her cancer fight broke in October 2006, sparking an outpouring of support from fans and well-wishers.
In 2007 she declared that months of gruelling chemotherapy had seen her beat the cancer despite "excruciating pain and uncertainty".
"It never occurred to me to stop fighting - not ever," she said.
However, in April this year it emerged that the cancer had returned and the actress was gravely ill.
In an interview with the Los Angeles Times published in May, Fawcett criticised the media frenzy over her health, saying she would have preferred to have kept details of her illness private.
"It's much easier to go through something and deal with it without being under a microscope," Fawcett said.
"I'm a private person," she continued. "It would be good if I could just go and heal and then when I decided to go out, it would be OK."