Vicki Letele was jailed last year for property fraud. Soon after she started her sentence she was diagnosed with stomach cancer and given six months to live.
RNZI reports her family unsuccessfully appealed to the Parole Board for an early release, before the Corrections Department agreed to review the decision.
Corrections urged the board to urgently consider compassionate release, resulting in that decision being overturned in November, and Letele being released from Wiri Prison.
Her brother Dave said she died peacefully surrounded by her family last night.
He said they were blessed to spend the last months of her life with her, and it was especially important for her children.
The Letele family was now making plans to farewell her later in the week.