The 73 year old was found unresponsive late Tuesday morning and taken to Lynchburg General Hospital, where he was pronounced dead.
Falwell's physician, Dr. Carl Moore, said the evangelist had been suffering from a heart rhythm abnormality, according to the Associated Press.
For decades, Falwell had been one of the leading conservative voices in politics.
"Jerry has been a tower of strength on many of the moral issues which have confronted our nation," evangelist Pat Robertson said Tuesday.
Falwell founded a fundamentalist church in an abandoned bottling plant in 1956, which grew into the 22,000-member Thomas Road Baptist Church. He then founded Liberty University in 1971, according to Reuters.
He became a nationwide leader of Christians through his "Old Time Gospel Hour" that was carried on television stations around the country.
At first he opposed mixing preaching with politics, but changed his view and founded the Moral Majority in 1979. The political organization grew to 6.5 million members and raised $69 million to support conservative candidates and campaign against abortion, homosexuality, pornography and bans on school prayer, reported the AP.
He was fond of saying the Bible referred to "Adam and Eve, not Adam and Steve."
Falwell credited his Moral Majority with getting millions of conservative voters registered and helping elect President Reagan in 1980.
In 1983, U.S. News and World Report named him one of the 25 most influential people in America.
But his outspoken ways sometimes brought criticism, even among his peers.
The Rev. Billy Graham once rebuked him for political sermonizing on "non-moral issues," according to the AP.
Days after Sept. 11, 2001, Falwell caused a flap for essentially blaming feminists, gays, lesbians and liberal groups for the terrorist attacks.
In 1987, Falwell stepped down as president of Moral Majority but continued to be a vocal proponent of conservative views and appeared on television talk shows.
He briefly took over the Praise the Lord (PTL) ministry in South Carolina after Jim Bakker's troubles, but gave it up after learning of the extent of PTL's financial problems.
Falwell encountered some financial difficulties of his own -- at one point Liberty University was $73 million in debt, and his "Old Time Gospel Hour" was $16 million in debt.
But in the 1990s, two local businessmen with ties to Falwell began overseeing the finances and helped get companies to forgive debt or write them off as losses, reported the AP.
He spent much of his time working to keep the university afloat, and the morning of his death was chatting with students, said the university's executive vice president Rob Godwin.
"Dr. Falwell was a giant of faith and a visionary leader," Godwin said.
Falwell had made arrangements to transfer leadership to his two sons, Jerry Falwell Jr., who is vice chancellor of Liberty University, and Jonathan Falwell, pastor of Thomas Road Baptist Church.
His daughter Jeannie Falwell Savas is a surgeon in Richmond, Va.
Falwell also is survived by his wife Macel.