Saunders guided Villa to the top flight in 1974 with promotion in his first season in charge.
He ended his managerial career at West Bromwich Albion, retiring in 1987.
Villa players will wear black armbands and hold a period of applause when they host Leicester City in the Premier League on Sunday.
Former Villa striker Stan Collymore was among the first to pay tribute, tweeting: "Sincerest condolences to Ron's family and friends.