"Nelson Mandela will be remembered for being an incredibly inspirational leader," Mr Key said.
"Someone that was a beacon of hope for the people of South Africa but someone that also believed passionately in reconciliation."
Mr Key said Mandela was looked to by leaders around the world and the people of New Zealand had great admiration for him.
He said New Zealand's relationship with Mandela was intimate and there had been many times when New Zealanders had met him in the past.
"Of course that scene after the 1995 Rugby World Cup final when South Africa beat the All Blacks and Nelson Mandela came on the field with a Springbok jersey on is something many New Zealanders will remember.
"But most of all he'll be remembered for the deeds he undertook. The struggle he personally went through. The enormous amount of time he spent in jail. But also the way that he could see that the future for South Africa was one of reconciliation. He needed to take the people of South Africa forward. He needed to show to the world that there was forgiveness and that there was a new dawn for South Africa."
He said Mandela had been an integral part of the fabric of South Africa and predicted an "incredibly emotional" time for South Africans now.
"I think it will be a massive outpouring of grief. There will be very emotional scenes and I think they will carry on for a long time.
"He's the person that led them fundamentally into independence, or the modern South Africa and someone that was that bridge between their past with apartheid but very much the future and the hope of the new country."
Mr Key would travel with other representatives to South Africa once details of the funeral were known.
"I think it's appropriate that, given the stature of such an incredible man and his deeds and achievements, that New Zealand should be represented."
Boxing great Muhammad Ali saluted the legacy of Nelson Mandela, saying the revered icon of South Africa's anti-apartheid struggle "taught us forgiveness on a grand scale."
Ali's was just one of the tributes that poured in from the world of sport in the wake of Mandela's death at the age of 95.
Ali, the former heavyweight world champion who himself became a beloved civil rights campaigner, said he was "deeply saddened" by Mandela's death.
"His was a life filled with purpose and hope; hope for himself, his country and the world," Ali said. "He inspired others to reach for what appeared to be impossible and moved them to break through the barriers that held them hostage mentally, physically, socially and economically. He made us realize, we are our brother's keeper and that our brothers come in all colors."
"What I will remember most about Mr. Mandela is that he was a man whose heart, soul and spirit could not be contained or restrained by racial and economic injustices, metal bars or the burden of hate and revenge. He taught us forgiveness on a grand scale. His was a spirit born free, destined to soar above the rainbows. Today his spirit is soaring through the heavens. He is now forever free."
'He belongs to the ages'
President Barack Obama said Mandela was an inspirational leader who "bent the moral arc of the universe towards justice".
"He achieved more than could be expected of any man. Today he has gone home," Obama said from the White House Briefing Room.
"He no longer belongs to us. He belongs to the ages."
Obama said he drew inspiration from Mandela's life, remembering his first political rally was a campaign against apartheid.
President Obama: "We will not see the likes of Nelson Mandela again. It falls to us to carry forward the example that he set.
'Selfless struggle for human dignity'
Nelson Mandela was a singular figure on the global stage - a man of quiet dignity and towering achievement, a giant for justice and a down-to-earth human inspiration, United Nations Secretary-General Ban Ki-Moon said today.
"I am profoundly saddened by his passing. On behalf of the United Nations, I extend my deepest condolences to the people of South Africa and especially to Nelson Mandela's family and loved ones."
Many people worldwide were greatly influenced by Mandela's "selfless struggle for human dignity, equality and freedom'', Mr Ban said.
"He touched our lives in deeply personal ways. At the same time, no one did more in our time to advance the values and aspirations of the United Nations."
Mandela devoted his life to the service of his people and humanity, and he did so at great personal sacrifice, Mr Ban said.
"His principled stance and the moral force that underpinned it were decisive in dismantling the system of apartheid.
"Remarkably, he emerged from 27 years of detention without rancor, determined to build a new South Africa based on dialogue and understanding."
The Truth and Reconciliation Commission established under his leadership remained a model for achieving justice in societies confronting a legacy of human rights abuses, Mr Ban said.
"I was privileged to meet Nelson Mandela in 2009. When I thanked him for his life's work, he insisted the credit belonged to others. I was very moved by his selflessness and deep sense of shared purpose.
"Nelson Mandela showed what is possible for our world and within each one of us - if we believe, dream and work together.
"Let us continue each day to be inspired by his lifelong example and his call to never cease working for a better and more just world," Mr Ban said.
'Relief is drowned by our grief'
South Africa's archbishop emeritus Desmond Tutu lauded Mandela as the man who taught a deeply divided nation how to come together.
"Over the past 24 years Madiba taught us how to come together and to believe in ourselves and each other. He was a unifier from the moment he walked out of prison," he said.
"We are relieved that his suffering is over, but our relief is drowned by our grief. May he rest in peace and rise in glory."
Tutu dismissed doomsayers who have long predicted South Africa will fall apart after Mandela's death.
"To suggest that South Africa might go up in flames - as some have predicted - is to discredit South Africans and Madiba's legacy.
"The sun will rise tomorrow, and the next day and the next... It may not appear as bright as yesterday, but life will carry on.
"As we enter the mourning period, as a nation, we do so with the greatest dignity and respect because that is what we owe Madiba and ourselves."
New Zealand's Governor-General says the death of Nelson Mandela marks the passing of "a global legend'' and a man whose example moved the world.
Lieutenant General Sir Jerry Mateparae paid tribute to the anti-apartheid leader in a statement issued by Government House today.
He said Mandela's death "marks the passing of a global legend; a man and a leader whose example moved humanity and the world''.
It was a time of great sadness for the people of South Africa, who mourned the loss of the man often described as their 'father of the nation'.
"However, in every country the world over, many will sense that a bright light has been extinguished; that we have lost a statesman who showed that patience, humility and forgiveness could work miracles and could overcome the forces of dogma, inertia and violence.''
Sir Jerry said Mandela's death was deeply mourned in New Zealand.
"I am keenly aware of the great legacy Nelson Mandela bestowed to his country and to the world.
"He was a man of great courage, vision and mana who peacefully guided South Africa from the evil of apartheid to a racially inclusive democracy.
"Despite spending 27 years of his life in prison, he emerged without bitterness, committed to a vision of a free and democratic South Africa based on peace, justice and reconciliation.''
Sir Jerry said Mandela held out his hand in peace to his former foes, saying he was prepared to forgive but never to forget.
"His leadership showed oppressed peoples worldwide that moral force can end tyranny. His leadership brought hope for a better future to millions.''
Mandela was an iconic symbol of hope, peace and justice worldwide, but he was also a family man whose wife, children and wider family grieved for the loss of the private man that only they knew.
Sir Jerry and his wife, Lady Janine, extended their deepest sympathies to Mandela's family and the people of South Africa
'What an extraordinary and inspiring man'
Speaking from the Odeon cinema, Prince William said: "I just wanted to say it's extremely sad and tragic news.
"We were just reminded what an extraordinary and inspiring man Nelson Mandela was. My thoughts and prayers are with him and his family. It's very sad"
'All of us who admired him must carry on his struggle'
Amnesty International paid tribute today to Nelson Mandela as one of the world's most visionary leaders in the fight to promote human rights.
"As a world leader who refused to accept injustice, Nelson Mandela's courage helped change our entire world,'' said Grant Bayldon, Executive Director at Amnesty International.
"The death of Nelson Mandela is not just a loss for South Africa. It is a loss for people all over the world who are fighting for freedom, for justice and for an end to discrimination.''
"Nelson Mandela's commitment to human rights was epitomised by his unswerving resolve to stamp out racial inequality during apartheid, followed by his vital work in combating HIV/AIDS in South Africa. His legacy across Africa, and the world, will stand for generations.''
Mr Bayldon said the human rights movement around the world owed Nelson Mandela a debt of gratitude.
"All of us who admired him must carry on his struggle.''
'May Nelson Mandela rest in peace'
Former Prime Minister Helen Clark says Nelson Mandela will continue to inspire those who fight injustice.
Ms Clark, who heads the United Nations Development Programme, said it was with great personal sadness that she learned of his death today.
"Nelson Mandela was an extraordinary man who represented for many around the world the ideals of freedom, peace, and justice,'' she said.
"Like many of my generation, I was inspired by Nelson Mandela's vision for a democratic South Africa.
"Dismantling the apartheid system and building a South Africa in which all enjoyed equal rights of citizenship was the cause to which Mr Mandela devoted his life.''
Ms Clark said Mandela's inspiration and spirit of solidarity were never limited by national boundaries.
"Nelson Mandela's words and deeds will continue to inspire those who wish to advance human dignity and fight injustice.
"That too will be the enduring legacy of this great man who dedicated his life to the cause of a better life for others.
"I count myself fortunate to have been among those privileged to meet Mr Mandela and to have heard personally his vision for his country and its people.
It was too early to say if a memorial service would be held in New Zealand for him, she said.
'Synonymous with peace and democracy'
Labour leader David Cunliffe also expressed his sadness, saying Mandela's death would leave an enormous void.
"Nelson Mandela was not just a champion for a generation of South Africans, but was an internationally renowned anti-apartheid campaigner.
"His name became synonymous with peace and democracy."
Mr Cunliffe said his "indomitable spirit" was an inspiration to millions.
"He displayed remarkable dignity in rising above the wrongs of apartheid to unite his people and his nation. The world is a poorer place for his passing and he will never be forgotten.
"Our condolences go to his family and to the many who will be mourning with them today."
Unicef: Today we had lost lost a hero
Unicef has paid tribute to Nelson Mandela's work helping 2 million African school children enrol in school.
Anthony Lake, Unicef Executive Director said today we had lost lost a hero, and a powerful champion for children.
"In 2004, through his Foundation and in partnership with the Hamburg Society and Unicef, Mandela launched the Schools for Africa campaign to enrol two million African children in school. He started his own children's fund and fought passionately, with his wife, Graa Machel, and the Global Movement for Children and Unicef, to put children at the heart of the global development agenda."
'The Dream of a Better Life for all lives on'
Gregory Fortuin, former South African consul and race relations conciliator said Mandela taught us that South Africa belongs to its peoples.
"Today I salute not just our first democratically elected President and Nobel Peace Prize winner but the Father of Justice and Reconciliation.
"When the world model was Nuremberg Madiba gave us Truth and Reconciliation.
"When the majority of us clamoured for the dumping of the hated Springbok symbol, Madiba wore it as a statement of Nationbuilding to 50 million South Africans.
"Under his inspirational leadership we integrated two flags and two anthems and crafted a constitution lauded across the world.
"Most of all Madiba taught us that South Africa belongs to all its peoples and to reach out to each other. Tata Mandela will always remain our Moral Compass and our Beacon of Hope.
"I regret that due to Madiba's incarceration our first embrace was on foreign soil, but will forever treasure the privilege of being His representative and serving - at the president's pleasure.
"A great man has passed but the Dream of a Better Life for all lives on.
"Sleep well Tata Madiba. As we say in Porirua - U R da Man."
'As a symbol ... there was no one greater'
New Zealand's former Race Relations Commissioner, Joris de Bres, who was active in the anti-apartheid student movement, said Mandela's death was a moment to reflect on the extraordinary contribution he had made.
"He is somebody who essentially lives in the hearts of incredibly diverse peoples all around the world,'' he said.
"Personally he's been a well-known figure to me since the 1960s - he's been an inspiration, and is an inspiration, and will be an inspiration for anybody who cares about racial equality and race relations.''
Mr de Bres said Mandela was a symbol of the anti-apartheid movement throughout the decades he was in jail.
"As a symbol ... there was no one greater,'' he said.
"He has had an extremely long and productive life, and he's contributed phenomenally even in his later years ... so I think one mourns his passing, but one celebrates his life and his contribution.''
Mr de Bres said it was evident from social media that New Zealanders were mourning his loss and celebrating his life.
'We all just loved him'
Sheralee Clarke worked as a press photographer in Durban for 29 years and covered many key moments in Mandela's life, including his release from prison.
"It was history and I was there, it was an amazing time - I was pretty proud of that.''
Ms Clarke now works in Auckland putting together the South African magazine.
She became tearful when speaking about the former president.
"Whenever he came into Durban we would be able to go and meet him and photograph him and walk amongst the people.
"He's just a great man, he had a presence and he was humble and he mixed with everybody.''
There will be different reactions to Mandela's death from South Africans living here, she said.
"People have had to leave because of what happened in South Africa...and they will say he was to blame.
"But the way he ran the Government when he was there, he did it in such a way he was uniting everybody - it's just unfortunate he couldn't be in power forever.''
South Africa magazine editor Peter Woodberg said people would probably mourn in their own way here rather than a memorial service being organised.
'Mandela was an inspirational figure'
Nelson Mandela was inspirational to New Zealanders and especially Maori who opposed the 1981 Springbok tour, Greens co-leader Russel Norman says.
Dr Norman expressed his sadness at Mandela's death, saying his life had shown how one person's struggle against the injustices of apartheid and colonisation made a difference.
He said Mandela was an inspiration to indigenous people all around the world.
"For many New Zealanders and especially Maori who had opposed the Springbok tour of 1981, Nelson Mandela was an inspirational figure," he said.
"Our hearts go out to the thousands of others who played their part in the struggle that Nelson Mandela lead. Today will be a great day of sadness for all those who played their part in fighting against the iniquities of apartheid."