The actor Peter O'Toole who found stardom in David Lean's masterpiece Lawrence of Arabia, has died aged 81, his family has announced, The Guardian reported.

The acclaimed leading man who overcame stomach cancer in the 1970s passed away at the Wellington hospital in London following a long illness.

O'Toole announced last year he was stopping acting saying: "I bid the profession a dry-eyed and profoundly grateful farewell."

He said his career on stage and screen fulfilled him emotionally and financially, bringing him together "with fine people, good companions with whom I've shared the inevitable lot of all actors: flops and hits."

The president of Ireland, Michael Higgins, was among the first to pay tribute: "Ireland, and the world, has lost one of the giants of film and theatre."

The British prime minister, David Cameron, paid tribute to the actor, saying that Lawrence of Arabia, his favourite film, was "stunning".

Early in his career O'Toole became emblematic of a new breed of hard-drinking Hollywood hellraiser.

"We heralded the '60s," he once said. "Me, [Richard] Burton, Richard Harris; we did in public what everyone else did in private then, and does for show now. We drank in public, we knew about pot."

In the 1990s he found stage fame starring in Keith Waterhouse's play, Jeffrey Bernard is Unwell, about a hard-drinking journalist who propped up bars in Soho. O'Toole's version sold out the Old Vic theatre in 1999.

Last month it was reported he had been coaxed out of retirement to act in a film about ancient Rome called Katherine of Alexandria in which he would play Cornelius Gallus, a palace orator. It is believed he completed filming on the project alongside Joss Ackland, Steven Berkoff and Edward Fox and the movie is due to be released next year.

O'Toole is believed to have been born in Connemara in County Galway in Ireland, and lived in London. He shot to stardom in the 1962 film of TE Lawrence's life story and went on to take leading roles in Goodbye Mr Chips, The Ruling Class, The Stunt Man and My Favourite Year. He received an honorary Oscar in 2003 after receiving eight nominations and no wins – an unassailed record. He considered turning it down and asking the Academy to hold off until he was 80, on the basis that "I am still in the game and might win the bugger outright."

He finally accepted, saying: "Always a bridesmaid, never a bride, my foot".

He is survived by his two daughters, Pat and Kate O'Toole, from his marriage to actress Siân Phillips, and his son, Lorcan O'Toole, by Karen Brown.