After the crash, Simoncelli was taken to the medical center at the Sepang circuit where he died of chest, head and neck injuries, organizers said.
"He was already unconscious when the medical team arrived," MotoGP medical director Michele Macchiagodena said. "We attempted to resuscitate him but failed. He died 45 minutes later."
The race, the second to last of the season, was canceled.
Simoncelli, a rising MotoGP star, died at the same Malaysian circuit where the Italian won the 250cc world title in 2008. His death came only a week after Indianapolis 500 winner Dan Wheldon was killed in a 15-car accident in the IndyCar finale at the Las Vegas Motor Speedway.
Simoncelli lost control of his Honda at Turn 11 four minutes into the race, but his bike regained partial grip and swerved across the track and into the path of American Colin Edwards and Italian Valentino Rossi.
Simoncelli's helmet was ripped off in the collision and he lay motionless on the track. He had been fourth at the end of the first lap.
"Quite clearly the consequences and circumstances surrounding the accident will be thoroughly investigated," race director Paul Butler said.
Edwards dislocated a shoulder in the crash. It was reset under anesthesia and the American was "fine," Macchiagodena said.
"Marco was a strong rider and he always pushed hard," said Honda rider Andrea Dovizioso of Italy. "We raced together since we were kids, I saw him always pushing to the maximum, he crashed many times, but without major injuries, he seemed invincible. What happened today seems impossible."
The Italian's death was first fatality in MotoGP since Japan's Daijiro Katoh died from injuries sustained at the 2003 Japanese Grand Prix. The number of deaths in MotoGP since it was founded in 1949 is now at 47, MotoGP said.
Last year, Japanese teenager Shoya Tomizawa died after crashing in a Moto2 race at San Marino.
Sepang circuit chairman Mokhzani Mahathir voiced his condolences and said it was unfortunate that a death occurred for the first time since the circuit opened in 1999.
"We had our standard operating procedure ... this is one-of-a-kind freak incident where the helmet came off and I am sure (motorcycling body) FIM and MotoGP will be looking into this," he said.
Newly crowned MotoGP champion Casey Stoner said that he feared for Simoncelli after seeing video of the crash.
"As soon as I saw the footage it just makes you sick inside," the Australian told the British Broadcasting Corporation. "Whenever the helmet comes off that's not a good sign."
The Italian motorcycling federation canceled all events planned for Sunday at the Mugello circuit near Florence.
The Italian Olympic Committee said it would honor Simoncelli by requesting a minute of silence at all Sunday's soccer matches, with AC Milan, his favorite team, planning to don armbands in his memory.
Italian Olympic Committee president Gianni Petrucci said Sunday marked the saddest day of his presidency.
"Life is sacred; you shouldn't die at age 24 just for a race," ANSA news agency quoted him as saying.
Nicknamed 'Super Sic' and sporting a mop of curly hair, Simoncelli was predicted by many to be a future MotoGP world champion.
Rossi had been one of the earliest riders to praise Simoncelli's desire to win.
"Going into a duel with him is like going into a fight with someone bigger than you," Rossi said. "You know he's going to take you."
Simoncelli was born on Jan. 20, 1987, in Cattolica in eastern Italy. He developed a passion for the sport at a young age and started racing in the Minibike Championships when he was 7.
He won the European 125cc title in 2002, the same year in which he made his debut in the 125cc World Championship, moving to the global competition full time the following season.
Simoncelli finished 21st that year but improved in 2004, when he moved up to 11th and earned his first win -- the Spanish Grand Prix at Jerez.
In 2005, Simoncelli joined the Nocable.it Race team. He won in Jerez again and totaled six podium finishes, ending the season -- and his time in 125cc -- in fifth place.
Simoncelli had an unimpressive start to his career in the 250cc class.
Riding for Gilera, he finished 10th in his first two seasons, with his best showing a sixth place in 2006. He finished seventh twice in 2007.
Everything changed the following year when Simoncelli won the 250cc world title despite crashing out on the first two races of the season. He clinched the title with a third-place finish at the Sepang circuit in Malaysia.
His title defense was hampered by a hand injury that kept him out of the first race. Despite six victories that year, Simoncelli finished third.
Simoncelli moved to MotoGP in 2010. His best result in his debut season was fourth in Portugal, and he ended the year in eighth position.
The young rider was thought to be a possible surprise contender this season, but had experienced a difficult year following several crashes. He finished on the podium twice, third in the Czech Republic and second a week ago in Australia.
Simoncelli's manager, Carlo Pernat, believes the youngster would have gone on to great things.
"Marco was a cheery boy, everyone's friend," Pernat said. "He had expectations, dreams. He was a boy from days gone by, with a wonderful family who taught him good values. It's terrible, there are no words, everyone's very upset, he could have become world champion one day."He had this desire to get to the top, it was really inside him, there was this desire for success because he knew he could have it."
