The British-born Australian singer and actress was best known for playing Sandy in Grease, one of the most successful film musicals ever made.
Her Grease co-star John Travolta said she "made all of our lives so much better" while its director said: "What you see is what you get with her."
She died peacefully at her California ranch surrounded by family and friends.
An actress and musician, Newton-John achieved commercial success as a country singer and sold millions of records globally.
But it was her role as high school student Sandy in the film Grease that catapulted her to worldwide fame.
The musical was the biggest box-office hit of 1978, and gave Newton-John three huge hit singles, including You're The One That I Want and Summer Nights, both performed with co-star John Travolta.
Following the news of her death, scores of fans as well as famous figures from the world of entertainment began to share heartfelt messages and memories.
Newton-John was born in Cambridge, UK on 26 September 1948.
Her father had been a British spy during World War Two. Her mother was the daughter of the German Nobel laureate, Max Born, and had fled with her family when the Nazis came to power in 1933. The family moved to Australia in 1954, where she was raised.
Newton-John was first diagnosed with cancer in 1992 and went on to become a leading advocate for cancer research. Her charity, the Olivia Newton John Foundation, has raised millions of pounds to support research.
She won four Grammy awards and scored seven US number one hits between 1974 and 1977.