Oumar Bocoum doused himself in flammable liquid and set himself alight outside President Abdoulaye Wade's official residence on Friday, in a protest mirroring several immolations across the Arab world in recent weeks.
Bocoum was believed to be one of a group of former soldiers seeking an increase in their pensions. Some of them have threatened to set themselves on fire if their demands are not met.
"He died at around two (0200 GMT) this morning. He suffered third degree burns to 85 percent of his body," a security source told AFP, adding that the man, aged around 40, suffered from depression.
A doctor at the main hospital in Dakar confirmed the death on private radio station RFM.
Weekend newspapers reported that Bocoum parked his scooter in front of a nearby administrative building before heading to the palace. He succeeded in torching himself despite guards' attempts to stop him.
Newspapers reported that he was carrying a piece of paper on which was written "Work or Die".
The Observer newspaper reported receiving a phone call from the victim just before he set himself on fire. "I have nothing more to do on this earth. Without work I am worth nothing," the paper quoted him as saying.
Another newspaper, Walfadjri, said Bocoum's protest was similar to several across North Africa in recent weeks.
"From Dakar to Tunis, Algiers to Cairo, fire continues its macabre waltz. It's fashionable, people are manifesting their distress through sacrifice."