The 33-year-old IndyCar driver was involved in a multi-car accident 13 laps into the Las Vegas Indy 300 which sent his vehicle flying and left wreckage and debris across the track.
Wheldon`s car flew over another and caught part of the catch fence just past the apex of turn two.
The incident left Townsend Bell`s car upside down and smoldering cars strewn along the track.
Wheldon, who lived in St. Petersburg, Florida, was flown by helicopter to University Medical Centre in Las Vegas for treatment before his death was announced two hours later.
"IndyCar is very sad to announce that Dan Wheldon has passed away from unsurvivable injuries," IndyCar Series CEO Randy Bernard said in a statement.
"Our thoughts and prayers are with his family today," Bernard added.
The race was cancelled and drivers returned later for a moving and tearful five-lap tribute.
A popular figure, Wheldon was the 2005 Indy Racing League IndyCar Series champion and he won the Indy500 race that year and also in 2011.
When the drivers returned to the track, Wheldon`s fellow British driver, Scotsman Dario Franchitti, was sobbing uncontrollably as he was strapped back into his car.
After winning eight British national titles in karting and then finishing third in the 1998 Formula Ford championship in Britain, Wheldon moved to the U.S. in pursuit of better opportunities.
He clinched the F2000 Championship Series in 1999 with six victories and then moved into IndyCar where he won rookie of the year honours in 2003.
Wheldon claimed the 2005 series thanks to six wins for Andretti Green Racing.
The Englishman later raced for Panther Racing and his final team Bryan Herta Autosport.
Wheldon leaves his wife Susie and their two young sons.
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