Lucian Freud, widely acknowledged as one of the greatest, most influential and yet most controversial British painters of his era, has died at his London home.

News of his death, at the age of 88, was released by his New York art dealer, William Acquavella. The realist painter, who was a grandson of the psychoanalyst Sigmund Freud, had watched his works soar in value over recent years and, in 2008, his portrayal of a large, naked woman on a couch – Benefits Supervisor Sleeping – sold at auction for £17m, a record price for the work of a living artist.

Born in Berlin, Freud came to Britain in 1933 with his family when he was 10 years old and developed his passion for drawing. After studying at art school, he had a self-portrait accepted for Horizon magazine and, by the age of 21, his talent had been recognised in a solo show. He returned to Britain after the war years to teach at the Slade School of Art in London.

Over a career that spanned 50 years, Freud became famous for his intense and unsettling nude portraits. A naturalised British subject, he spent most of his working life in London and was frequently seen at the most salubrious bars and restaurants, often in the company of beautiful young women such as Kate Moss, who he once painted. A tweet from the writer Polly Samson last night reported that Freud's regular table in The Wolseley restaurant was laid with a black tablecloth and a single candle in his honour.

The director of the Tate gallery, Nicholas Serota, said last night: "The vitality of [Freud's] nudes, the intensity of the still life paintings and the presence of his portraits of family and friends guarantee Lucian Freud a unique place in the pantheon of late 20th century art.

"His early paintings redefined British art and his later works stand comparison with the great figurative painters of any period."

Acquavella, described him "as one of the great painters of the 20th century".

"In company, he was exciting, humble, warm and witty. He lived to paint and painted until the day he died, far removed from the noise of the art world."

The son of an architect and older brother of broadcaster Clement Freud, the painter was married to Kathleen Garman for four years. They had two daughters. His second marriage, to Caroline Blackwood in 1953, ended in 1957. The novelist Esther Freud and the fashion designer Bella Freud are his daughters from a relationship with Bernardine Coverley.

Curator at the Museum of Modern Art in New York, Starr Figura summed up Freud's divisive quality. "The ones who don't appreciate him find his work hard to look at and a bit out of step with what is going on in the rest of the world. They have a hard time categorising it."

One of Freud's most often reproduced paintings is of the Queen, who posed for Freud fully clothed. The brightly coloured portrait was donated to the Queen's collection and is one of the most controversial depictions of the monarch.

Art critic and presenter Tim Marlow said Freud was a "very special man".

"He looked at the world was as if he was painting it but when you saw his paintings you saw how he really saw it," he said.

"He was the sort of person who had a twinkle in his eye but he would also look at you in a daunting and scrutinising way.

"He was very funny and very dry. He never lost his sharpness."

Viewpoint

Lucian was the most hilarious man I'd ever met. I met him briefly at a club with [mutual friend] Leigh Bowery, and then he took me to lunch at the River Cafe. There were a group of us and he told a joke about how a whale wanks, complete with movements.

A few weeks later he asked if he could paint me. Leigh had already put the idea into his head, so it wasn't a surprise. The first picture was done at night. I'd go after work and he'd paint till 1 or 1.30 in the morning, and it was agony lying there on the floor. First Leigh was in the picture, then he went to Scotland and one of Lucian's whippets took his place.

The next three paintings were in daylight, which was better. I'd arrive, we'd have some breakfast and a chat in the kitchen – that was the bit I loved, the setting up. Lucian was a good cook: he used the best ingredients and did very little to them, gorgeous bread, gorgeous fish, cooked plainly. Then he'd say: "Sue, perhaps you could wash those dishes – I think you use that green stuff in the corner." We'd leave them to pile up. He had a cleaner who came three times a week.

He would paint with us both facing the canvas, so he'd look at me and then turn around to paint. I trained to be an art teacher, so it wasn't all new to me, but I'm very shoddy, very slapdash, and it taught me that it is real work: each painting took nine months, and he was seeking perfection right up to the moment he finished.

There was a big break between paintings because I went on holiday to India and got a tan, which he hated beyond belief: we had to wait till it was gone. Every picture he painted was to test himself, to do it in a different way.

Sometimes he was very chatty, sometimes he was very quiet – I always thought he should have been on the telly. He'd say terrible things about people, but he never saw that he was really rude. I was always a bit jealous: he did exactly as he pleased. He was funny, miserable, horrible, kind, mean, generous, every character trait mixed up in one person.

The last time I saw him was about two years ago at his birthday party, at Johnnie Shand Kydd's house. Someone told me he and I had fallen out, which I didn't know, so I was a bit nervous about seeing him. I was shaking when I went up to say hello, and had I offended him, but he said "Of course you haven't", and patted me on the head.

I was lucky to spend time with someone who cared so much, and who worked so hard. He wasn't cruel – he painted what he saw. What strikes me most is, I look at my fat ankles and my fat feet every morning and I think they look just like that painting. Even the skinny girls don't look good, do they? He painted out of love.

Sue Tilley, model for Benefits Supervisor Sleeping