The 53-year-old was killed in the town of Zintan, 135km southwest of the capital, Tripoli, according to two Libyan security officials in western Libya on Tuesday.
The circumstances of his death were not immediately clear.
The officials spoke on condition of anonymity because they were not authorised to brief the media.
Khaled al-Zaidi, a lawyer for Seif al-Islam, confirmed his death on Facebook, without providing details.
Abdullah Othman Abdurrahim, who represented Gadhafi in the UN-brokered political dialogue which aimed to resolve Libya's long-running conflict, also announced his death on Facebook.
Abdurrahim didn't provide further details, but Libyan news outlet Fawasel Media cited him as saying that armed men killed Seif al-Islam in his home.
The outlet reported that prosecutors were investigating the killing.
Born in June 1972, Seif al-Islam was the second-born son of the longtime dictator. He earned a PhD at the London School of Economics and was seen as the reformist face of the Gadhafi regime.
His father Moammar Gadhafi was toppled in a NATO-backed popular uprising in 2011 after more than 40 years in power. He was killed in October 2011 amid the ensuing fighting that would turn into a civil war.
Seif al-Islam was captured by fighters Zintan late in 2011 while attempting to flee to neighbouring Niger. The fighters released him in June 2017 and had since lived in Zintan.
A Libyan court convicted him of inciting violence and murdering protesters, and sentenced him to death in absentia in 2015.
He was also wanted by the International Criminal Court on charges of crimes against humanity related to the 2011 uprising.
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