Costelloe was appointed as Diana's personal designer in 1983, shortly after establishing his own label, Paul Costelloe Collections, and their collaboration continued until she died in a car crash in Paris in 1997.
Costelloe, who led the development of all his collections from his studio in central London, was invited to show at the city's premier catwalk event in its inaugural year in 1984 and was there in September to present his latest spring-summer creations.
Costelloe died peacefully, surrounded by his wife and seven children in London following a short illness, the family said in a statement on Saturday.
Costelloe was born in Dublin in 1945, where he initially trained before moving to Paris's revered Chambre Syndicale de la Haute Couture and then to another fashion capital, Milan, where he was designer for the luxury department store La Rinascente.
He spent some time in New York where he established his own label before settling in London, where his partnership with Princess Diana flourished.
His collections today include womenswear, menswear, bags, homeware and jewellery.
"Paul led a remarkable life as a leading figure in Irish, UK and international fashion and business for decades. He built a hugely successful business through incredible talent, discipline, and an unwavering commitment to quality," Ireland's Deputy Prime Minister Simon Harris said in a statement.
"His was and is a quite remarkable Irish success story."
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