Ugur Suleyman Soylemez, 51, who was left in a coma for four years after being wounded in the IDF raid of the Mavi Marmara in 2010, passed away on Friday, Turkish media reported.
His death raises the Turkish death toll from the incident to ten.
The news comes amid reports Turkey and Israel were about to finalize the terms of a formal settlement.
The two nations, erstwhile allies, have been negotiating for months to end a diplomatic crisis over the Israeli commandoes' boarding of the Mavi Marmara, a Turkish ship challenging Israel's naval blockade of Palestinian-run Gaza Strip in 2010.
In a rapprochement brokered by Washington, Prime Minister Benjamin Netanyahu apologized to his Turkish counterpart Tayyip Erdogan last year and pledged compensation to the bereaved or hurt.
On Thursday, Humanitarian Relief Foundation (IHH), that organized the Gaza-bound flotilla, said that it objected a compensation agreement in which legal cases against Israeli officials involved in the raid are dropped.
"We are warning the authorities against this clear violation of global law principles," Ugur Yildirim, a lawyer for IHH, told reporters.
Israel is facing public and private prosecutions in Turkey over the deaths. Jerusalem has previously dismissed the cases as "political theater."
Turkey was once Israel's closest regional ally, though their relationship had deteriorated before the raid.
Last month Erdogan said the two countries were days or weeks away from an agreement.
The son of one activist who died aboard the Mavi Marmara told the news conference the families would accept neither apology nor compensation.
"We do not accept any agreements unless the blockade on Gaza is lifted. Israel will have to take a step back if we stand tall," Ismail Bilgen told reporters.
Israel says the blockade on goods destined for Gaza is aimed at preventing the Palestinian militant group Hamas that controls the territory from smuggling in weapons.
Reuters contributed to this report.