The 23-month-old - who was being treated at Alder Hey Children's Hospital in Liverpool - died at 2.30am, Kate James and Thomas Evans said on Facebook.
The youngster was at the centre of a legal battle over his treatment that touched hearts around the world.
The post on said: "Our baby boy grew his wings tonight at 2:30 am. We are heart broken. Thankyou everyone for all your support."
Mr Evans, 21 and Ms James, 20, had fought to take their son to a foreign hospital for treatment for a degenerative medical condition, but lost a final court appeal on Wednesday.
Doctors had removed Alfie's life-support following a High Court judge's ruling on Monday, however he continued to live.
His parents said that the youngster had defied doctors' expectations and they took their case to the Court of Appeal, but the application to take him abroad was rejected.
Mr Evans said their lives had been "turned upside down" by the "intense focus" his case had received.
"Our little family along with Alder Hey has become the centre of attention for many people around the world and it has meant we have not been able to live our lives as we would like," he said.
The attention and emotion garnered by Alfie's plight and his parents' determined public campaign to get the treatment they believed he needed led to high tensions between supporters and staff at Alder Hey.
Bosses said they were "shocked" at the "barrage" of abuse that came from some quarters after they found themselves "at the centre of a social media storm".
It led Merseyside Police to issue a warning over comments being made about the hospital online.
After accepting that their options had been exhausted, Alfie's parents sought to build bridges with medical staff and pledged to work alongside doctors to give him "the dignity and comfort" he needed.
He said: "We... thank Alder Hey staff at every level for their dignity and professionalism during what must be an incredibly difficult time for them too.
"Together we recognise the strains (that) recent events have put upon us all and we now wish for privacy for everyone concerned."
In a statement issued on its website, Alder Hey Children's Hospital said: "We wish to express our heartfelt sympathy and condolences to Alfie's family at this extremely distressing time.
"All of us feel deeply for Alfie, Kate, Tom and his whole family and our thoughts are with them.
"This has been a devastating journey for them and we would ask that their privacy and the privacy of staff at Alder Hey is respected."