Diana and her mother Frances Shand Kydd at Wimbledon

Frances Shand Kydd, 68, had been frail since being treated in hospital after falling ill in April.

Her son, Earl Charles Spencer, issued a statement from the family home of Althorp House confirming she had died peacefully on Thursday morning.

Her grandson Prince William said he and his brother Harry were "very upset" at her death.

The Queen has sent a private message of condolence to the Earl, a Buckingham Palace spokeswoman said.

And the Prince of Wales said his former wife's mother would be "sorely missed".

This is now a private time for the family to grieve Earl Spencer Obituary: Frances Shand Kydd

Mrs Shand Kydd had lived away from the media spotlight on the island of Seil, near Oban.

Her local Roman Catholic priest, Canon Donald MacKay, said he was with her there when she died.

A spokesman for Earl Spencer said: "I can confirm that Lord Spencer's mother passed away peacefully this morning after suffering from a long illness.

"This is now a private time for the family to grieve."

Mrs Shand Kydd was last seen in public in 2002, when she spoke at the Old Bailey trial of royal butler Paul Burrell, before it collapsed.

Earl Spencer and sister Lady Sarah McCorquodale visited her in April after she fell ill.

'Deeply spiritual'

A spokesman for the Diana, Princess of Wales Memorial Fund said Mrs Shand Kydd's contribution would be "much missed".

"Our thoughts and condolences at this time are with our president, Lady Sarah McCorquodale, and other members of her family," the spokesman said.

"Mrs Shand Kydd, as an executor of the late Princess's estate, played a valuable role in supporting the Memorial Fund, and her contribution will be much missed."

The Right Rev Ian Murray, the Roman Catholic Bishop of Argyll and the Islands, said Mrs Shand Kydd had been a valued worshipper at St Columba's Cathedral in Oban.

He said: "The whole Catholic community of the highlands will be saddened to hear of the death of Frances Shand Kydd.

"She was a deeply spiritual woman who had very successfully made her home here, integrating into the community very well."

Family friend Lord St John of Fawsley also paid tribute to Mrs Shand Kydd's devotion.

"She was a very kind and caring person who loved her daughter, the Princess of Wales, very much.

"She found lasting peace and comfort in the Catholic Church."