He passed away peacefully in hospital on Tuesday after a short illness.
Born in Tourmakeady, County Mayo, he worked as a teacher before securing a part in the premiere of the Brian Friel play Translations in 1980.
Lally became a household name in Ireland for his role as Miley Byrne in the RTE soap opera Glenroe and later starred in the BBC series Ballykissangel.
He also appeared in the Hollywood movie Alexander and provided the voice for the Oscar-nominated, animated Irish film, The Secret of Kells.
As a fluent Irish speaker and advocate of the language, Lally had roles in several Irish language films.
He is survived by his wife Peggy and their children Saileog, Darach and Maghnus.
One of Ireland's best known actors, Mick Lally, has died at the age of 64.