The actor had been unwell for quite some time now and his health had been a matter of great concern for his friends and family.
He was admitted to a city hospital on Jul 14, just a few days after he was released from the same hospital, owing to weakness. He was discharged on Tuesday.
His estranged wife, actress Dimple Kapadia, and daughter Rinkie had been by his side all the time, since his admission to the hospital.
His funeral will be held at 11 am Thursday, family sources said.
Khanna is hailed as India's first superstar after 15 consecutive solo superhits between 1969 and 1972, including 'Aradhana', 'Haathi Mere Saathi', 'Anand' and 'Amar Prem'.
Rajesh Khanna had recently appeared in his first TV ad for a fan.
(With inputs from agencies)