His career high came in the 1970s and included the anthemic Baker Street and Stuck in the Middle with You, recorded with his band Stealers Wheel.
Rafferty had battled a drink problem and spent time in hospital in Bournemouth with liver failure.
He was born in Paisley and began his musical career as a busker on the London Underground.
Rafferty died peacefully at his home in Dorset, with his daughter Martha at his bedside.
It is understood his funeral will be held in Paisley later this month.
Rafferty had recorded and toured with Billy Connolly as part of the Humblebums, before forming Stealers Wheel with his friend Joe Egan in 1972.
Stuck in the Middle with You was a hit in the early 70s and also appeared on the soundtrack of Quentin Tarantino's debut film Reservoir Dogs in 1992.
Baker Street charted in the UK and US in 1978 after Rafferty began his solo career and still achieves airplay on radio stations around the world.
Musican Raphael Ravenscroft, who played the song's famous saxophone melody, described Rafferty as "a fantastic writer" who "wrote some of my favourite songs of all time."
In a statement, Billy Connolly called Rafferty "a hugely talented songwriter and singer who will be greatly missed".
He added, "I was privileged to have spent my formative years working with Gerry and there remained a strong bond of friendship between us that lasted until his untimely death.
"Gerry had extraordinary gifts and his premature passing deprives the world of a true genius."
Music journalist and BBC Radio 2 presenter Paul Gambaccini said it was a cruel irony that Baker Street, about Rafferty's unhappiness with being a star, brought him more of the fame he hated.
Gambaccini said: "He just wasn't of the constitution to deal with the music business, or to respect it.
"And thus he found fame and artistic success incompatible, and he became a wanderer, a lonely man, allegedly a drinker. And now we have this unhappy end."
Musician and BBC 6 Music presenter Tom Robinson said Rafferty would be greatly missed.
"I'm deeply saddened to hear that Gerry has lost the battle with his failing health," he said.
"His early work with Stealers Wheel was an inspiration to a whole generation of songwriters in the 70s, including me.
"Many of us had hoped his recent album Life Goes On in 2009 would lead to a full-time return to writing and performing for a lyrical and highly gifted artist."
BBC News website readers from around the world have sent in their tributes:
Don't Speak of My Heart was my favourite. His voice was like velvet.  Calmed me down just listening to him. I cannot believe he has gone. Susan Miller, Kilmaurs, Ayrshire, Scotland
Have followed his releases from Stealers Wheel to present. He wrote beautiful songs and he and Joe Egan, who sadly didn't get the same recognition, have left me some great musical memories. George Morris, Donaghadee, County Down, Northern Ireland
As a muso myself, I loved the arrangement of the haunting Baker Street and often performed Stuck In The Middle With You with a band I was a part of in the 80s and 90s in England. Both songs are played frequently on New Zealand radio stations. Gerry will be sorely missed. Tony Last, Hastings, New Zealand
My first LP was Can I Have my Money Back, which I still have. My favourite song is The Ark from City to City with Jerry Donahue on guitar. He wrote about life itself, things one can relate to. He brought musical quality into life at times when there was not much around. Keith Dhan-Weller, Nuertingen, Germany
Baker Street is probably my favourite song. I'm a songwriter and I teach creative writing. Baker Street is about Gerry's own experience with the music industry but he wrote the lyric in the third person. This makes the story more interesting and sad. The song works on so many different levels. Musically and lyrically. Richard Abbott, Limavady, Northern Ireland
I was a young radio producer with BBC Scotland in the late 1960s when a couple of lads came in to Queen Margaret Drive to take part in some programmes. They were the Humblebums, and they made brilliant music. Rehearsals attracted all sorts of excuses from staff to absent themselves from their desks to go and listen in the studio cubicle. Little did we know... Alan Muirhead, Kirkby Lonsdale, Cumbria, England
My eldest daughter was in school with his daughter Martha when Gerry lived in Kilmacolm. My husband and I were great fans of his music and songs and are sorry to hear of his death. Rita Walker, Greenock, Scotland
Gerry Rafferty had depths beyond his two best-selling singles. A talented and open-minded musician who supported other talents - he will be missed. Alastair, Northampton, England
Scottish singer-songwriter Gerry Rafferty has died at the age of 63 after suffering a long illness.