The former police captain ran a covert counter-insurgency unit that detained and killed anti-apartheid activists.
Â­It operated in secrecy from Vlakplaas, a farm near Pretoria, recruiting black liberation movement members whom it turned into killers.
He revealed the existence of Vlakplaas in 1989 when he was smuggled out of South Africa to write his story.
Coetzee claimed responsibility for the killings of several African National Congress (ANC) members.
He took refuge in London after exposing the group in an interview with a liberal Afrikaans newspaper.
Once he was in exile, he joined the ANC, where he was known as Comrade Dirk with allegiance to Nelson Mandela, and himself became an assassination target for the white-minority government.
He later returned to South Africa and joined the post-apartheid spy service after Mr Mandela became president in 1994.
He was later convicted of murder, but granted amnesty by the Truth and Reconciliation Commission in 1997 when he publicly confessed to murdering a Durban human rights lawyer, Griffiths Mxenge.
However, Coetzee failed to reveal the place where another activist, Sizwe Kondile, had been buried after being killed and burnt.
Coetzee was central to many secrets of the apartheid era, but in giving him amnesty for his crimes, the Truth Commission found that he had simply been following orders from higher-ranking security police commanders.
He died at Life Wilgers Hospital in Pretoria from kidney failure, a hospital spokeswoman said on Thursday.

The area around Green Park, which also has a large business park, is notorious for its long traffic queues, particularly on match days.
Plans for Green Park Station were put on hold two years ago, but the council now wants work on it to start within three years.
Reading Borough Council is set to re-submit planning proposals for the stop next year.
The stop, by junction 11 of the M4 on the Reading to Basingstoke line, is expected to cost up to ??8m to build.
The plans were pulled two years ago when a key developer dropped out.
Simon Beasley, network manager at the council, said: "I think it will make a real difference, a positive difference.
"Clearly we don't know how it will be serviced by trains but if there's anybody who can divert from the roads to the railways, then of course that's going to be positive."
Dirk Coetzee, one of the most notorious figures of South Africa's apartheid era, has died at the age of 57.
[NEXT_CONCEPT]
A new railway station could be built near the Madjeski Stadium in Reading.