Chahine had been flown to France for treatment one month ago, but returned to Egypt where he was admitted to the Maadi Military Hospital in Cairo.

The director's last film, "Heya Fawda" (Chaos), shown at the most recent edition of the Cairo International Film Festival, created quite a stir for the portrayal of police abuse and corruption.

The film caught the attention of Western media, who said it "pulled no punches" in being critical of Egyptian society. The film was released at a time when Egyptian police had been accused of using torture.

"He skewers political parties and Islamists," was the verdict of the film industry's Variety magazine.

At the Venice Film Festival last September Chahine, despite his age, said he was confident of working another decade.

"I am young. I am only 81 years old. I hope I can keep working for another 10 years. Old age is to let oneself become old," said Chahine.

But illness and an eventual hemorrhage caught up with the successful director who discovered fellow Egyptian Omar Sharif – who made international fame for his acting in "Lawrence of Arabia" and "Doctor Zhivago" – and who is credited with establishing the art house film scene in Egypt.

"He was one of the few Egyptian artists who was able to make a name for himself beyond the confines of the Middle East," said managing editor of Egypt's Enigma Magazine and author Amy Mowafi. "His death is a tragic loss for both the local industry and our country."

Chahine's list of achievements is long, even for a man who spent half a century making films. He made a total of 44 films, but was stripped of Egyptian government funding following his cult film "Al Asfour" (The Sparrow) that argued that Egypt and the Arab world lost the 1967 War with Israel, because of political pandering and corruption.

Controversy never worried him, as he produced and directed three acclaimed films in the 1990s that concentrated on tolerance and the distinction between Islamic fundamentalism and terrorism. The films, "Al-Muhajer" (The Emigrant), "Al-Masir" (Destiny) and "Al-Akhar" (The Other) were ahead of their time, as the 2001 attacks on the United States opened the gates to film upon film discussing terrorism and Islam.

Variety hailed "Destiny" as "the most courageous frontal attack on Islamic fundamentalism to come out of the Arab cinema to date ... and a blunt allegory condemning the politically driven fanaticism of present times."

The 1994 film "The Emigrant" was banned by the Egyptian government who accused the director of basing his film on the Biblical and Koranic story of Joseph. The depiction of prophets is banned almost universally in Islam.

"Every day human beings suffer a lot from people telling you to shut up, you have no right to talk, you have no right to discuss," Chahine said.

"I think this is extreme violence, and it happened to me."

His life was one of dreams, growing up in the Mediterranean coastal city of Alexandria, on which he based his 1979 autobiographical film, "Alexandria… Why?"

Chahine moved to the United States to study film and acting in California before returning to Egypt.

The Cannes Film Festival's 50th anniversary Lifetime Award winner in 1997, he remained in contact with his American teachers. But, he said, recent controversies surrounding American foreign policy struck a chord with the director.

"I am still very attached to my professors who taught me filmmaking 60 years ago in California," he said in an interview in 2003.

"I fell in love there during that time ... but [now] there is also the fury I feel against American politics."

In the past few years, he spent more time on causes than in specific film productions. In 2001, Chahine spent time on the picket lines as he worked to defend the rights of Cairo farmers protesting government efforts to appropriate their land.

At the time, he said "the enemy is not only outside, but also inside," a statement that many argue is a summation of his cinematic view.

Youssef Chahin is survived by his wife, Colette, a French national. His burial will take place in his hometown of Alexandria after a funeral ceremony in Cairo on Monday.