Margaret Thatcher Dies

David Cameron makesa statement on the death of Margaret Thatcher. Photograph: Ray Tang/Rex Features

Lady Thatcher, Britain's first female prime minister, died peacefully in her sleep aged 87 on Monday after suffering a severe stroke while staying at the Ritz.

The former Conservative leader, who became the longest-serving British prime minister of the 20th century, had suffered ill health for more than a decade, and was staying in a suite at the central London hotel while recuperating after a minor operation.

The prime minister, David Cameron, who was in Madrid on a European tour, immediately returned to Britain to announce parliament was being recalled from Easter recess "for a special session in which tributes will be paid".

Thatcher's friend and spokesman, Lord Bell, who was informed of her death at midday on Monday, said in a statement: "It is with great sadness that Mark and Carol Thatcher announced that their mother, Baroness Thatcher, died peacefully following a stroke this morning."

The Queen expressed her sadness and has sent a private message of condolence to the family.

Tributes flooded in from around the world for the grocer's daughter who would become one of the most divisive political figures in modern-day British politics.

Cameron hailed her lasting legacy of a "great Briton who defied barriers".

The US president, Barack Obama, said the "world has lost one of the great champions of freedom and liberty, and America has lost a true friend.

"She stands as an example to our daughters that there is no glass ceiling that can't be shattered."

She is to be accorded the rare honour of a ceremonial funeral with full military honours at St Paul's Cathedral, central London, followed by a private cremation.

The union flag above No 10 Downing Street, the home she inhabited for longer than any other modern British prime minister, was lowered to half mast – as was that above Buckingham Palace and many other landmarks across the country.

It was flying at half-mast too at the visitor centre in Port Stanley in the Falkland Islands, the British outpost to which she had dispatched a task force to rebuff an Argentinian invasion, thus sealing her reputation as the "Iron Lady".

Within an hour of her death being announced, flowers were being left outside the London home she had become too frail to live in unaided in recent months.

In her last days, she had seemed very peaceful, according to friends,

An intimate account of her last hours was given on Monday by Lady Carla Powell, the Italian wife of Thatcher's former diplomatic adviser Lord Powell, who had visited her often in her declining years, and to whose house outside Rome the former prime minister had visited on several occasions.

Lady Powell said her husband had told her, after leaving Lady Thatcher on Sunday night, that he had sat beside her bed. "She dozes off to sleep quite often and then she wakes up and we chat for a bit," she quoted her husband as saying.

Lord Powell had said he had talked to her about his wife's dogs, the garden of their Italian home and about the new pope. He had said he was not quite sure how much of all this Thatcher had taken in. "But she smiles a lot and seems peaceful,".