He was serving a 25-year prison sentence for human rights violations committed during the dictatorship
Alvarez, who played a central role in a 1973 coup that installed a military regime in Uruguay, ruled the country from 1981 to 1985.
He was serving a 25-year prison sentence for human rights violations committed during the dictatorship.
Suffering from dementia and respiratory problems, he was transferred two weeks ago to the Montevideo Military Hospital, where he died.
Human rights activists called on Uruguayans to remember victims of the regime on the occasion of his death.
"With the greatest respect, a rapist, a murderer, a torturer, a 'disappearer' doesn't redeem himself by dying," said lawyer Oscar Lopez Goldaracena, who took part in Alvarez's trial for the kidnapping and presumed murder of 40 regime opponents.
Thousands of people were jailed, tortured or killed by the regime in Uruguay, one of many Latin American countries where the military ruled with brutal repression during the Cold War.
Some 6,000 people were jailed for political reasons.
Around 230 people abducted by the regime in cooperation with other South American dictatorships are missing and presumed dead, according to a Peace Commission that investigated rights abuses by the regime.
Many of them disappeared without a trace.
"The first thing I thought is, he died with the secret of all the people he 'disappeared' and killed," said activist Beatriz Benzano, one of 28 women imprisoned by the regime who in 2010 publicly accused their jailers of sexual assault.
"Kidnapping children, robbing babies, disappearances, raping men and women.... He had an interminable list of crimes," she told AFP.
There was no love lost on Alvarez's side.
His brother Artigas, an army colonel, was killed by the leftist Tupamaro guerrillas in 1972. His killing deeply marked Alvarez, shaping his brutally hardline stance.
Uruguay returned to democracy in 1985, after swelling protests forced the regime to agree to elections.
Rather than transfer power to the democratically elected president, Julio Maria Sanguinetti, Alvarez stepped down two weeks before and named a civilian interim.
Today, Uruguay is governed by a leftist coalition that includes ex-Tupamaro guerrillas and other former opponents of the military regime.