On 7 September 2004, Ahmed died of pancreatic cancer. He was buried in Model Town, Lahore, Pakistan.
In November 2004, Allama Iqbal Open University staff organized an event in Islamabad to pay tributes to Ahmed. At this event, Chairman, National Language Authority, Fateh Muhammad Malik stated that with the death of Ashfaq Ahmed, a vacuum had been created in the literary world of Pakistan. Chairman, Pakistan Academy of Letters, Iftikhar Arif also paid tribute to him as a dynamic literary figure and said that one of his priorities had always remained welfare of the people.