"It is with great sadness that Merchant Ivory Productions announces that ... our company founder and beloved producer for more than 44 years has passed away after a brief illness," his office said in a statement on Wednesday.
Merchant, born in Mumbai (Bombay) in December 1936 and educated in New York, became a household name when he teamed up with fellow filmmaker James Ivory to form Merchant-Ivory Productions.
Their string of international film credits included hits such as A Room with a View, Howards End, The Remains of the Day, Heat and Dust and The Bostonians.
Merchant's first film was The Creation of Woman, a theatrical short that was not only nominated for an Oscar in 1961 but was an official US entry to the Cannes film festival.
Merchant meets Ivory
It was while travelling to the festival that Merchant met Ivory, and they agreed to form their partnership, initially to make high production English-language costume dramas in India tapping into funds of US companies in frozen rupee accounts.
The deal was that the frozen money owned by major US distributors could not leave the country but could be used to finance films made in India but distributed internationally.
A string of features followed, including The Householder, Shakespeare Wallah, The Guru and Bombay Talkie.
Gradually the duo built up an international following, attracting a host of Oscar-nominated and Oscar-winning actors to their glossy productions from Greta Scacchi and Christopher Reeve to Anthony Hopkins and Vanessa Redgrave.
Their collaboration was one of the most enduring and productive in Hollywood.
The release of The Golden Bowl starring Nick Nolte, Uma Thurman and Angelica Huston in the United States in 2001 marked Merchant's 40th year of filmmaking.
Before his death, Merchant was putting the finishing touches to his latest film, The White Countess, for release this year.
Apart from his film career, Merchant was a renowned chef and the author of several books on quality cooking.
Merchant graduated from New York University with a masters degree in business administration before breaking into film.