Harley's family said on Sunday he had "passed away peacefully at home, with his family by his side".
Harley said late last year he was being treated for "a nasty cancer".
Born in London in 1951, Harley worked as a trainee accountant and as journalist on local newspapers, and began his performing career at London folk clubs.
He formed Cockney Rebel, which released a debut album The Human Menagerie in 1973 before foundering over creative differences.
With a new line-up and rebranded as Steve Harley and Cockney Rebel, the band released the 1975 album The Best Years of Our Lives, which contained Harley's biggest hit.
With its barbed lyrics - aimed at Harley's former bandmates - and infectiously catchy chorus, the Alan Parsons-produced Make Me Smile topped the United Kingdom singles chart.
It went on to be covered scores of times and was used on countless soundtracks, including in the 1997 film The Full Monty and in ads for Carlsberg beer and department store Marks and Spencer.
Harley also sang the title song of Andrew Lloyd Webber's musical The Phantom of the Opera alongside Sarah Brightman when it was released as a single in 1986.
He was originally cast in the title role for the stage musical but was replaced by Michael Crawford.
Ultravox frontman Midge Ure, who produced Harley's 1982 track I Can't Even Touch You, called him a "true 'working musician'".
"He toured until he could tour no more, playing his songs for fans old and new," Ure wrote on social media.
"My thoughts go out to Dorothy and his family at this very sad time. Our songs live on longer than we ever can".
Harley is survived by his wife Dorothy, children Kerr and Greta and four grandchildren.
The family said in a statement that they knew he would be "desperately missed by people all over the world".
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