An official statement confirmed she had passed away after a lengthy battle against Parkinson's Disease. She was 70.
Battling to the end, she had a private member's bill before the Scottish Parliament seeking to allow terminally ill people the right to assisted dying.
Her husband said in a statement, Jim Sillars said: "My wife Margo MacDonald died peacefully at home surrounded by her family today at 1.10pm.
"She leaves a void in our lives which will be impossible to fill and her death robs the Scottish nation of one of its greatest talents. She was without question the most able politician of her generation. Today the brightest light in the Scottish political firmament has gone out. Her legacy will speak for itself.
"She supported and inspired generations of idealists and campaigners who, like her, wanted Scotland to take its place in the world. Her talent acted like a magnet and she gave her time so freely to so many for so long.
"Many will mourn, but the pain of loss will be borne most of all by those at the heart of her life; her children and her grandchildren, we will do all we can to honour her memory."
Scottish Parliament Presiding Officer Tricia Marwick led the tributes to Margo MacDonald with a superbly apposite quote:
"Margo MacDonald was brave, passionate and committed. To be known and recognised by a first name is reserved to very few. But everyone knew Margo. She had a rare skill in being able to translate political speak into language we could all understand.
"She was a sparkling jewel in the Scottish Parliament, her contributions were incisive, intelligent and always got to the heart of the issue under discussion.
"Margo cared about people and, in return, they cared about her.
"My heartfelt sorrow and our condolences from across the parliament go out to her husband and her family at this time."
Scottish Labour Leader Johann Lamont said: "Margo's passing sees a bright light, and one of the biggest personalities and characters of Scottish modern political life, go out.
"Her sense of humour, passion, integrity and unflinching desire to speak truth to power, meant she came as close to a political treasure in Scotland as I think it is possible to be.
"As one half of a formidable political union with Jim, she was a trailblazer in many ways. The fact that she was elected and returned as an independent by the people of Lothian, a rare feat in national politics, shows how she had become part of our political fabric. Her loss leaves Parliament, her much-loved Leith and her family, with a very large and painful gap which can't be filled.
"Her passion for self-determination, in all its senses, meant that she often crossed swords with many political foes. But her unwavering belief in that right saw her continue to press her case. Even when we disagreed, she would always conduct herself in a way in which you understood that her overwhelming motivation was one of improving humanity. We could have a political argument, but you could never fall out with Margo. That was a tremendous tribute to her. In all the turmoil of political debate, there were innumerable examples of her personal kindness to everyone.
"My heart goes out to Jim, her children Petra and Zoe and her grandchildren. They will, I hope, take comfort from all the voices celebrating Margo's life and offering them our love and prayers. Margo's passion and integrity inspired us all. Her legacy will be remembered for years to come. Scotland has lost one of its proudest daughters. A family has lost a wife and mother. Parliament has lost one of its biggest personalities and voices. Today, we mourn her loss, but we must also celebrate her life."
Leader of the Scottish Liberal Democrats Willie Rennie said: "Margo was a force of nature in Scottish life. The affection for her transcends party politics and political parties. Her personal kindness and professional charm will be missed in the parliament, throughout the Lothians and far wider."
Blair Jenkins, chief executive of Yes Scotland, said: "There will never be another Margo. She was held in great affection and respect by everyone who came in contact with her, regardless of their political views. She was a very distinguished parliamentarian but, much more than that, Margo will be remembered for her great humanity and concern for her fellow citizens.
"She was one of the best-loved champions of the national movement for independence, a cause for which she campaigned vigorously and very passionately for all of her adult and political life. She had a formidable intellect and was an extremely accomplished debater, but what endeared her to so many was her warm personality, her natural ability to communicate and - of course - her great sense of humour.
"In the 25 years that I knew her, first as a colleague at STV and more recently as a fellow campaigner for a Yes vote, she was always good company and a source of great energy and ideas. My thoughts are with Jim and the family at this very sad time."