Dame Tessa, who was 70, was diagnosed with a glioblastoma multiforme brain tumour in May last year, suffered a haemorrhage on Friday, and had been in a coma until her death on Saturday, a spokesman for the family said.
A popular figure in Parliament, Dame Tessa played a major role in securing the 2012 Olympics for London when she served as culture secretary.
Dame Tessa moved fellow peers to tears in recent months as she used the House of Lords as a platform to discuss her condition and call for patients to have better access to experimental treatment.
The family spokesman said: "It is with great sadness, and an enormous sense of loss, that we announce the death of Tessa Jowell.
"She died peacefully at the family home near Shipston-on-Stour in Warwickshire last night, shortly after 10pm. Her husband David and their children Jessie and Matthew were by her side, with Jessie's husband Finn, Matthew's wife Ella, and David's children from his first marriage."
The spokesman added: "In addition to chemotherapy and radiotherapy, in recent months doctors tried innovative new treatments which Tessa gladly embraced, but sadly the tumour recently progressed very quickly.
"The family would like to thank people for the overwhelming support Tessa and they have received since she became ill. They have been touched and moved by the response, in both Houses of Parliament; from members of the public; and other cancer patients and their families around the world."
There will be a small private funeral in the coming days, and a memorial service open to all at a later date, the spokesman said.
Former Prime Minister Tony Blair said: "Tessa had passion, determination and simple human decency in greater measure than any person I have ever known. She was an inspiration to work with, and a joy to be near. She was the most wise of counsellors, the most loyal and supportive of colleagues, and the best of friends.
"What she achieved was remarkable. She was the first senior politician fully to understand the importance of public health and to shift health policy towards prevention of illness and not only cure. She was the instigator of Sure Start and in the process gave hope and opportunity to hundreds of thousands of children. She brought the 2012 Olympics and Paralympics to London, and ensured their success."
Lord Sebastian Coe, president of the IAAF and former chairman of the London organising committee of the Olympic Games, said: "Tessa was not just a close friend, she was a life enhancer.
"Her contribution to the Olympic and Paralympic Games is easily defined - quite simply, without Tessa there would have been no London 2012, and without Tessa they would not have been the success they were.
"No politician deserves greater credit for the Games. She showed unflinching tenacity in persuading the Prime Minister and the Cabinet that the Government should throw its full weight behind the bid."
Commons Speaker John Bercow said: "Tessa was an indefatigable campaigner who translated care from a word to a deed at every turn. Through her focus on Early Years provision, Tessa did more than most to improve lives and promote social justice. Passionate, warm and empathetic, she saw the best in everyone and won respect and affection across the political spectrum."
Lord David Blunkett said: "Tessa was one of my closest friends for over 40 years.
"Alongside the triumph of helping to win the Olympic Games for London, it will be Tessa as a person who I will remember. There when people needed her, both personally and also with her political hat on, and with her bravery over the last year, always thinking of others."