The most senior US senator, Democrat Daniel Inouye of Hawaii, has died of respiratory problems at the age of 88.

Inouye had served in Congress since 1959, when Hawaii became a state, and had been a senator since 1963.

He also received the Medal of Honor, the US' highest military honour, losing an arm but destroying a Nazi bunker during a battle in Italy.

He was the first Japanese-American in Congress and most recently chaired the powerful appropriations committee.

According to a statement from his office, Inouye's last words were "Aloha".

In a statement, President Barack Obama said "our country has lost a true American hero".

Senate Majority Leader Harry Reid announced Inouye's death on the Senate floor on Monday. The Hawaiian senator was president pro-tempore of the Senate, third in the line presidential succession.

"His service to the Senate will be with the greats of this body," Sen Reid said.

"He had every reason to call attention to himself, but never did," Republican senate minority leader Mitch McConnell said.

"He was the kind of man, in short, that America has always been grateful to have, especially in her darkest hours: Men who lead by example and expect nothing in return."

Hawaii Governor Neil Abercrombie will appoint Inouye's replacement. The seat is up for re-election in 2016.

'Bloody and expensive'

Born in 1924 in Honolulu, Hawaii, Daniel Inouye volunteered for US army shortly after the Japanese attacked Pearl Harbor in 1941, joining the famed Japanese-American 442nd Regimental Combat Team. He was 17 at the time.

"I tried to put myself in the shoes of my neighbours who were not Japanese," Inouye said about signing up.

"I felt that there was a need for us to demonstrate that we're just as good as anybody else. The price was bloody and expensive, but I felt we succeeded."

In 1945, Inouye lost his arm in the battle that would later win him the Medal of Honor.

While he was leading a charge on German machine gun nest in Italy, he was shot in the abdomen, but managed to throw two grenades before his right arm was shattered by a German grenade.

"Despite the intense pain, he refused evacuation and continued to direct his platoon until enemy resistance was broken and his men were again deployed in defensive positions," his citation for the medal read. "In the attack, 25 enemy soldiers were killed and eight others captured."

The senator received the honour in 2000, after the junior senator from Hawaii at the time, Daniel Akaka, got Pentagon officials to review records to determine if some had been denied the honour because of racial bias.

Inouye was one of 22 Asian-American World War II veterans who belatedly received the medal, many from the 442nd regiment.

During his convalescence from his injuries, Inouye met Bob Dole, the future majority leader of the Senate and 1996 Republican presidential candidate, who also was recovering from severe war injuries. The two later served together in the Senate for decades.

But Inouye returned to a still-hostile America. On his way home from the war, he often recounted, he entered a San Francisco barbershop only to be told, "We don't cut Jap hair."

While Inouye was popular senator in Hawaii, especially due to the federal investment he brought to his state, he largely avoided the spotlight.

In 1968, President Lyndon Johnson urged Vice President Hubert Humphrey, who had won the Democratic nomination for president, to select Inouye as his running mate, to silence the vice-president's critics on the Vietnam war.

But the senator was not interested. In 2008, his chief of staff said Inouye was "content in his position as a US senator representing Hawaii".

Inouye also served on the congressional committee that investigated the Watergate affair and recommended impeachment proceedings against President Richard Nixon.

A decade later, he served as chairman on another investigation committee, an inquiry into Iran-Contra affair, questioning top Reagan White House officials.