Sharon's deputy, Ehud Olmert, immediately took the reins as acting prime minister and tried to convey a sense of stability, but Sharon's dramatic downturn left Israelis stunned and threw his ambitious peace agenda into doubt.
"I'm worried about the future of this country, about everything in this country," said Israeli Rafael Levy, a 42-year-old construction engineer from Tel Aviv.
Sharon's collapse less than three months before national elections left his moderate Kadima party, which appeared headed for an easy victory, in limbo.
Meni Mazuz, the attorney-general, announced that the Israeli election would be held as planned on 28 March.
Sharon was to face off against the new head of his former Likud party, Benjamin Netanyahu, and Labour party leader Amir Peretz.
"I can't see another person who will emerge who is as strong as Sharon"
Israeli political analyst
Menachem Hofnung, a political analyst, said: "I can't see another person who will emerge who is as strong as Sharon."
Palestinians and Arabs, however, had markedly different responses. While some exulted in glee at seeing the fall of their longtime enemy, others expressed apprehensions over the instability that could follow.
Some Palestinian leaders worried that Sharon's illness could derail their 25 January parliamentary elections.
Mahmoud Abbas, the Palestinian president, himself battling for his political future, said: "We are watching with great worry at what might happen if he is harmed."
Reactions were much stronger in the refugee camps housing impoverished Palestinians. Many of them simply love to hate Sharon.
In the Lebanese camp of Bourj Shemali, 52-year-old Zahra Qassem viewed Sharon as a butcher and warmonger.
"The Middle East will know better days after the death of Sharon," she said.
In 1982, Sharon, then Israeli defence minister, orchestrated the invasion of Lebanon and was later held indirectly responsible by Israel's highest court for knowingly allowing Israel's proxy, the Christian phalangist militia, to massacre thousands of Palestinians in the refugee camps of Sabra and Shatilla.
Palestinian resistance fighters had more stronger views.
Iranian President Ahmadinejad
hoped for Sharon's death
Khalid Mishaal, political leader of Hamas, said the demise of Sharon, whom he called a "war criminal", would have no effect on Palestinian policy because "we don't link our agendas to ... changes in Israeli political life".
But, he added: "The whole region will be better off with him absent."
Mahmoud Ahmadinejad, the Iranian president, who only weeks ago had called for Israel to be wiped off the map, hoped for Sharon's death.
"Hopefully, the news that the criminal of Sabra and Shatilla has joined his ancestors is final," Ahmadinejad was quoted as saying by the semi-official Iranian Students News Agency.
Jewish religious nationalists, who viewed Sharon's unilateral withdrawal from Gaza as blasphemous, were equally delighted over Sharon's misfortune.
Michael Ben-Horin, a member of the anti-Arab Kach group said: "The angels listened to our prayers."
Meanwhile, the United States remained cautious over what might lie ahead for Arab-Israeli peacemaking.
Condoleezza Rice, the US secretary of state, said: "I do believe that the desire for peace, the desire for a stable relationship between Israel and the Palestinians is one that runs wide and deep in Israeli society."