Mr Iwata underwent surgery last year and had resumed his duties after a brief period of recovery.
A highly revered figure in the Japanese gaming scene, he was considered the leading figure behind some of Nintendo's most popular devices since he joined the company in 2000.
Most recently, he led Nintendo into the rapidly growing mobile gaming sector.
Growing up in Japan in the 1980s, Super Mario was a gaming character that you couldn't avoid. But as the gaming population started to decline in the late 90s, Mr Iwata knew that he needed to make products that were more appealing to non-gamers.
And he succeeded. Nintendo DS quickly became the world's best-selling handheld game console when it was released in 2004.
Two years later, there came another successful launch of Wii which was dubbed the computer game that even your grandma can play. Together, they switched on millions of new converts to computer games.
But the rise of mobile phone games has posed a serious threat to Nintendo and some investors questioned his decision not to enter the market sooner.
As he put it himself, Mr Iwata was a chief executive who had the brain of a games developer and the heart of a gamer.
Nintendo's beloved gamer CEO
The iconic game maker has been losing market share to top competitors like Sony's PlayStation and Microsoft's XBox, with its latest Wii U console third in line.
Nintendo made its first annual operating profit in four years to the year that ended in March.
Mr Iwata started out as a programmer in a Nintendo subsidiary in the 1980s and became president of Nintendo in 2002.
Under his leadership, the company launched its hugely successful Wii and Nintendo DS consoles and he was considered the crucial driver behind the focus on easy-to-use consoles, a move that allowed the company to tap into a much wider audience beyond the traditional gaming community.
"Mr Iwata was a titan - he certainly will be missed," Marc Einstein, head of digital media at Frost & Sullivan in Tokyo, told the BBC.
"He was very much known for being a gamer first and a [chief executive] second - a game changing figure."
Tributes have been coming in on social media with the team at PlayStation tweeting: "Thank you for everything, Mr. Iwata."
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Japanese video game maker Nintendo has said its chief executive Satoru Iwata has died of cancer at the age of 55.