The city has posted a statement on its website, confirming his passing overnight.
"Our thoughts and prayers are with his family and friends at this most difficult time," the statement says. "His honesty, integrity and determination to improve his community, was evident to everyone who knew him. He will be truly missed by all of us."
Khan had served as a town councillor for three terms. Born in Toronto, he had been living in Oakville for more than 25 years at the time of his death.
The cause of Khan's death is not immediately known. But Tom Adams, a regional councillor who shared the same ward as Khan in Oakville, told CBC News that he had been ill in recent days.
"I understood that he had had what he called flu-like symptoms, but I understand it was pneumonia, but none of us believed it was really a dire and serious situation," he said in a telephone interview. "We all thought he would recover."
Khan had been poised to run for the federal Liberals in the upcoming federal election, as the party's candidate in the newly created riding of Oakville North-Burlington.
Liberal Leader Justin Trudeau tweeted Sunday that he was "very saddened" by Khan's death.
"My heart is with his loved ones— he will be sorely missed," Trudeau’s tweet said.
Adams said Khan's funeral will be held on Monday afternoon.