Fox was re-admitted to the Royal Columbian Hospital in New Westminster on June 19, 1981, with chest congestion and developed pneumonia. He fell into a coma and died at 4:35 a.m. PDT on June 28, 1981, a month before his 23rd birthday with his family by his side. The Government of Canada ordered flags across the country lowered to half mast, an unprecedented honour that was usually reserved for statesmen. Addressing the House of Commons, Trudeau said, "It occurs very rarely in the life of a nation that the courageous spirit of one person unites all people in the celebration of his life and in the mourning of his death ... We do not think of him as one who was defeated by misfortune but as one who inspired us with the example of the triumph of the human spirit over adversity".
One of Fox's earliest supporters was Isadore Sharp, founder of the Four Seasons Hotels. Sharp had lost his own son to cancer and offered Fox and his companions free accommodation at his hotels. He donated $10,000 and challenged 999 other businesses to do the same. Sharp also proposed an annual fundraising run in Fox's name. Fox agreed, but insisted that the runs be non-competitive. There were to be no winners or losers, and anyone who participated could run, walk or ride. Sharp faced opposition to the project. The Cancer Society feared that a fall run would detract from its traditional April campaigns, while other charities believed that an additional fundraiser would leave less money for their causes. Sharp persisted, and he, the Four Seasons Hotels and the Fox family organized the first Terry Fox Run on September 13, 1981.
Shortly after his death, Fox was named the Newsmaker of the Year for 1981, and Canada Post announced the production of a commemorative stamp in 1981, bypassing its traditionally held position that stamps honouring people should not be created until ten years after their deaths. British rock star Rod Stewart was so moved by the Marathon of Hope that he was inspired to write and dedicate the song "Never Give Up on a Dream" – found on his 1981 album Tonight I'm Yours – to Fox. Stewart also called his 1981–1982 tour of Canada the "Terry Fox Tour".