"Steve was hit by a stingray in the chest," said local diving operator Steve Edmondson, whose Poseidon boats were out on the Great Barrier Reef when the accident occurred on Monday.
"He probably died from a cardiac arrest from the injury," Edmondson said.
Police and ambulance officials later confirmed Irwin had died and said his family had been advised.
Irwin, 44, was killed while filming an underwater documentary off Port Douglas.
Irwin had been diving off his boat "Croc One" near Batt Reef northeast of Port Douglas. A helicopter had taken paramedics to nearby Low Isles where Irwin was taken for medical treatment; but he was dead before they arrived, police said.
Irwin won a global following for his dare-devil antics, but also triggered outrage in 2004 by holding his then one-month-old baby while feeding a snapping crocodile at his Australian zoo.
"He probably died from a cardiac arrest from the injury"
Steve Edmondson, a local diving operator
He made almost 50 of his "Crocodile Hunter" documentaries which appeared on cable TV channel Animal Planet and won a worldwide audience.
The series ended after he was criticised for the incident with his young son and for disturbing whales, seals and penguins while filming in Antarctica.
Khaki-clad Irwin became famous for his seemingly death-defying methods with wild animals, including crocodiles and snakes.
He made a cameo appearance alongside Eddie Murphy in the 2001 Hollywood film Dr Dolittle 2 and appeared on US television shows such as "The Tonight Show With Jay Leno" and on children's television alongside The Wiggles.
Irwin was married with two children, Bindi Sue and Bob Clarence. His American-born wife Terri was his business partner and frequent on-screen collaborator.