Diaz, who turned 72 on January 8, died at 9:20 am, the hospital spokesmen told EFE.
The former player was admitted to Fundacion Favaloro clinic in the Argentine capital to undergo scheduled surgery last Friday, but his condition worsened and he had to undergo a second operation.
Diaz made his debut at 19 with Racing Club, where he spent seven years and won Libertadores and Intercontinental cups.
He then played for San Lorenzo, signing with Atletico Madrid in 1973 and playing four seasons for the Spanish club, during which time he helped win one Copa Intercontinental, one Copa del Rey and one Spanish league title.
"Today is a sad day for the Atletico family. A legend has left us. Ruben Osvaldo 'Panadero' Diaz will always be in our hearts," the Spanish football club said in a Twitter post.
In 1977, Diaz returned to Racing Club for one season before retiring and becoming coach Alfio Basile's right-hand man on the bench.
Basile and Diaz won Copa Americas with Racing Club in 1991 and 1993, and a Confederations Cup title in 1992.
Diaz returned to Atletico for a brief time in 1995.
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