Boskov, who spent the majority of his playing career with FK Vojvodina, managed Los Blancos from 1979 until 1982, winning the league and cup in his first season at the Bernabeu.
He twice took charge of Yugoslavia in a managerial career that also saw him work in the Netherlands and Switzerland.
"Real Madrid is dismayed by the death of Vujadin Boskov and offers its condolences and affection to his friends and family, especially his wife and his daughter Jelena," a statement from Los Blancos read.
"He was a historical reference point not only for Real Madrid but for all football fans."
Madrid will wear black armbands as a tribute to their former coach in the second leg of their Champions League semi-final against Bayern Munich on Tuesday.