Kennedy won three European Cups and five league titles with the Reds whom he joined from Arsenal in 1974 having done the league and FA Cup double with the Gunners three years earlier.
A personal highlight was his pivotal away goal in the 1981 European Cup semi-final second leg against Bayern Munich.
He was diagnosed with Parkinson’s Disease in 1984 and a testimonial game between Liverpool and Arsenal was held in 1991.
Later that year he sold his medals and 17 England caps to help raise funds for his care.
A statement on Liverpool’s official website read: “The thoughts of everybody at Liverpool FC are with Ray’s family and friends at this sad and difficult time.”
Former Liverpool striker John Aldridge paid tribute to Kennedy, tweeting: “Yet another magnificent Ex LFC star has passed away folks.
“Ray Kennedy what a player and lovely bloke who suffered so much with Parkinson’s disease for most of his life. He will definitely never walk alone. RIP Ray ynwa.”
Former Liverpool defender Phil Thompson tweeted: “More sad news with the passing of Ray, what a great player and such a wonderful team-mate RIP pal YNWA.”
Kennedy scored three goals for England, his first coming on his debut against Wales in March 1976.
A tweet from the national team’s account read: “We are deeply saddened to learn of the passing of Ray Kennedy at the age of 70. Ray won 17 caps for the #ThreeLions between 1976 and 1980, scoring three times.
“All of our thoughts go out to his family, friends and former clubs.”