Albert Reynolds, the Irish premier who made biggest gamble of his long political career when he and John Major secured an IRA ceasefire 20 years ago this month, has died aged 81.

His family said the former taoiseach, who had Alzheimer's disease, died at about 3am on Thursday. Major – his co-partner in the drive to secure the ceasefire and push the peace process ahead in the early 1990s – was one of the last politicians from either side of the Irish Sea to visit him, last December.

Reynolds was Fianna Fáil prime minister in coalitions first with the Progressive Democrats and later the Irish Labour party.

A one-time promoter of country music gigs who later ran a pet food manufacturer, Reynolds pledged that peace in Northern Ireland would be his priority when he was elected taoiseach in 1993.

He famously said: "Who's afraid of peace?" when asked if he believed moves within the republican movement towards an IRA ceasefire were serious.

Although he had a close working relationship with Major, Reynolds admitted that the two men "took lumps out of each other" during debates about the IRA and Sinn Féin's intentions towards the peace process.

As taoiseach, Reynolds took further risks for peace by allowing a back channel to be established between his ministers, a Dublin trade unionist and loyalist paramilitaries in the hope that the latter would also follow the IRA towards a ceasefire in 1993-94.

During the buildup to both the IRA and loyalist ceasefires of 1994, Reynolds boasted that he had a network of contacts because of his business dealings with "pragmatic unionist people" across Northern Ireland.

And although he had backed the stridently nationalist and highly divisive Charles Haughey in an internal coup d'etat that ousted the then taoiseach, Jack Lynch, in 1979, Reynolds proved less ideological and more pragmatic himself in dealing with Northern Ireland.

A natural-born wheeler-dealer, he was industry minister before becoming taoiseach and secured large grants from the EU that rebuilt the infrastructure of Ireland in the early 1990s – a necessary precursor for the Celtic Tiger boom years to come.

His successor as taoiseach, Bertie Ahern, said: "I am deeply saddened to learn today of the death of Albert Reynolds.

"He was not afraid to take political risks to further the path of reconciliation. The Downing Street declaration paved the way for the IRA ceasefire and all the positives which have flowed from the peace process for people North and South.

"So much of this achievement has its roots in Albert's courage, perseverance and his commitment to democratic politics."

The person Reynolds helped bring in from the political wilderness – the Sinn Féin president, Gerry Adams – also paid tribute.

He said Reynolds had "acted when it mattered" in pushing the British to accept that Sinn Féin was about to secure an IRA cessation of violence. Adams's colleague Martin McGuinness, now the deputy first minister of Northern Ireland, said Reynolds would be remembered as a peacemaker.

Yet within only three months of helping to secure the IRA ceasefire and riding high in the opinion polls, Reynolds was out of office after his fragile coalition with the Labour party collapsed. The government in Dublin fell in large part because of the first of many paedophile priest scandals.

Dick Spring, the Labour leader and deputy prime minister, pulled out of the coalition after allegations that the attorney general's office at the time had blocked the extradition of the serial child abuser Father Brendan Smyth to Northern Ireland. The exposure of Smyth's crimes and allegations that elements of the Irish state were impeding attempts to try the priest across the border triggered a crisis of trust and the Reynolds-Spring axis that proved so vital during the peace process broke down.

He later tried to become Irish president, hoping his reputation for helping develop the peace process would make him a popular candidate for Fianna Fáil. But because of the paedophile priest scandal and later a disastrous libel action against the Sunday Times, a campaign emerged within the party to block his candidacy known as "Anybody But Albert". Instead in 1997 it chose Mary McAleese, a relatively unknown Belfast-born academic and broadcaster who would go on to win the presidency back for Fianna Fáil.

Following that humiliation Reynolds moved into obscurity, although he did publish his memoirs in 2007.

After visiting the ailing Irish politician in December 2013, Major praised Reynolds's efforts in advancing peace. The former prime minister stunned an audience at Dublin's Iveagh House with this reference to the fragile period leading up to the ceasefires: "Let me now say something that may surprise you. Throughout the process, I was acutely conscious that IRA leaders were taking a risk, too: if Albert and I upset our supporters we might – as Albert put it, be 'kicked out'. That was true but the IRA's supporters were more deadly than our backbench colleagues. And their leaders were taking a risk too, possibly with their own lives."