Conaway, who had a history of addictions to drug, alcohol and prescription painkillers, was hospitalized two weeks ago after being found unconscious in his Los Angeles area home.
At the time, he was also suffering from pneumonia and sepsis and was recovering from a recent back surgery.
Those factors, coupled with the effects of long-term addiction, meant he never regained consciousness.
The actor's manager Phil Brock said his family took him off life support on Thursday and he died on Friday morning, surrounded by his sisters, nieces and nephews.
Conaway found fame when he starred as the wise-cracking teen Kenickie in the 1978 film musical "Grease," alongside John Travolta and Olivia Newton-John.
He also became a television regular for playing Wheeler, a cab driver, on the hit comedy "Taxi."
"We lost someone that we loved on a personal basis," Brock told Reuters on Friday. "We tried to guide him through his struggles. We know that right now, someone in heaven is getting a hickey from Kenickie."
Conaway's problems with addiction were documented in 2008 when he appeared on the TV series "Celebrity Rehab."
Last month, Travolta offered to pay for the troubled actor to go back to rehab. Conaway never took him up on the offer.
"My heartfelt thoughts are with his family and loved ones at this very difficult time," Travolta said in a statement on Friday.
Brock told Reuters earlier this month that Conaway had a rough childhood. "When he was 7 years old, his grand-mother let him taste the moonshine she made in her bathtub; when he was 10 and a child actor, his dad took all his money and ran away. Later, Jeff had the world in his hand and would find ways to destroy it," Brock said.
"Putting aside his demons, Jeff is the nicest, kindest, gentlest soul," Brock added at the time. "He's a wonderful man, which makes it doubly sad that he is unable to conquer drugs. As a human being, he's the person who'd literally give the shirt off his back for someone."
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