Legendary coach Lobanovsky led the Soviet Union to the final of the European championship in 1988. He died Monday aged 63.
"Today at 8.35 p.m. local time the heart of the great Ukrainian coach Valery Lobanovsky stopped beating," Dynamo spokesman Serhiy Polkhovsky said Monday.
"We can't say with any certainty at this point what caused his death, but it is almost certain that he never regained consciousness after surgery."
Local media quoted hospital officials in the eastern Ukrainian city of Zaporizhya as saying that Lobanovsky died of complications following surgery.
He will be given a state funneral when he is buried on Thursday in Kiev.
The coach, who had a history of poor health, was rushed to a hospital in Zaporizhya last Tuesday following a Ukrainian Premier League match between Dynamo and Metalurg Zaporizhya.
Doctors had said Saturday that Lobanovsky's condition had improved after he underwent surgery to relieve pressure on his brain.
Lobanovsky will go down in history as the most successful coach in Ukraine and the former Soviet Union for the past three decades.
He epitomized the might of Soviet soccer when he guided Dynamo Kiev to two European Cup Winners' Cups in 1975 and 1986.
The stern-faced coach also led the Soviet side to second place at the 1988 European championships, its last major achievement in international competition.
He was also one of the first coaches to emphasize the importance of physical fitness and conditioning as much as tactics and technical skills.
But Lobanovsky's career was also dogged by controversy after some of his fellow coaches accused him of resorting to unfair practices.
While coaching the Soviet national team, Lobanovsky had unlimited power to poach talented players from rival clubs to his own side, helping Dynamo to five league titles between 1974 and 1981.
Some rival coaches even suggested that he pushed his players to the limit by using drugs. He always denied the charges.
Lobanovsky moved abroad shortly after the 1990 World Cup finals in Italy but returned to Kiev in November 1996 after a six-year absence to begin his third coaching spell with Dynamo.
His return paid immediate dividends for the Kiev side as it won five consecutive league titles, from 1997 to 2001.
During that time, Lobanovsky also led Dynamo to five straight Champions League appearances, including a European Cup semifinal in 1999.
His appointment as national team coach in January 1999, after Ukraine failed to reach the Euro 2000 finals following a shock defeat to Slovenia in a two-legged playoff, was greeted with euphoria by the nation of 50 million.
But Lobanovsky's persistent health problems over the last two years weakened his iron grip on the national team and the club.
Earlier this year, he underwent surgery to remove a blood clot. He was also found to have an irregular heartbeat, which forced him to miss a number of matches this season.
While Lobanovsky's place at Dynamo appeared safe until he died, he had lost his national team post following Ukraine's 5-2 thrashing on aggregate by Germany in their two-legged World Cup playoff tie last November.
Leonid Buryak, who played under Lobanovsky in the 1970s and 80s and was his assistant for the last two years, became Ukraine's new head coach.
But Buryak quickly found out that succeeding Lobanovsky was tough as local media reported that he too might be sacked following three defeats this year.