"He was a patient at the clinic but he left on Tuesday and died at home," said a hospital official, who declined to be named.
Escobar had a huge following in Spain in the 1960s and 1970s with hits such as "El Porompompero" but it was his best-selling version of "E Viva Espana", a song that foreign tourists took to heart in bars and pubs across Spain's beach resorts, that made him an international star.
He was "a symbol who lived in the musical landscape of Spaniards for half a century," Spain's culture minister, Jose Ignacio Wert, said in a statement.
Messages of regret spread on social networks, too.
"Manolo Escobar, a loving family man, collector of art, kind and likeable, a singer to the end, to the end of the world... goodbye!" Spanish actor Santiago Segura wrote on Twitter.
One of Escobar's last big acts was in July 2010 when, dressed in a yellow shirt and red jacket and tie, he sang with the Spanish football team to celebrate their victory in the World Cup in South Africa.
The fifth of 10 children, he was born in the small village of Las Norias de Daza in the southern Spanish region of Andalusia on October 19, 1931.
Escobar announced his retirement from music at the end of 2012 after 50 years on the stage.
Last month, he had to cancel the final acts of his farewell tour after falling ill.
"Music is my life, I will never surrender," he said this month in an interview with Spanish newspaper ABC.
"I am happy because I have work and because, moreover, people are still prepared to pay to see me on stage. I want to return to a few of the places I have been to in my career of more than 50 years and say goodbye for good. I will sing one more time in each one so that I don't go back," he added.
Escobar started his musical career as a child in the years after the Spanish Civil War (1936-1939), playing with his brothers and sisters in festivals and fairs, first in his native Andalusia and later in the northwestern city of Barcelona to where he moved as an adolescent.
In the early 1960s he shot to stardom with shows in Madrid and Barcelona and a film role in "The guerrillas" by Pedro L. Ramirez. Other films followed including "Father Manolo" in which he played a singing priest.
Escobar has lived in Benidorm for the past two decades. After music, he made painting his second passion and amassed a considerable collection.
In 1959 he married his German wife Ana Marx Schiffer, with whom he had one daughter.
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