Clare Nowland, who had dementia and weighed just 43kg, was critically injured after police responded to reports she was wandering her care home with a knife at about 4am last Wednesday.
She fractured her skull in a fall after the officer shot her with a stun gun in her retirement home in an incident which sparked a national outcry.
“It is with great sadness we confirm the passing of 95-year-old Clare Nowland in Cooma tonight," New South Wales police said in a statement.
“Mrs Nowland passed away peacefully in hospital just after 7 p.m. this evening, surrounded by family and loved ones who have requested privacy during this sad and difficult time."
The state's Police Minister, Yasmin Catley sent her condolences and said her sympathies were also with the people of Cooma and the residents and carers at the home.
“We will continue to offer support to the Nowland family as they mourn this loss," she added in her statement, according to the Sydney Morning Herald.
The force launched an investigation and on Wednesday said a senior constable would appear in court next week to face charges of recklessly causing grievous bodily harm, assault occasioning actual bodily harm and common assault.
The officer could now face upgraded charges.