The unmarried star had complained about feeling unwell and retired to her room.
She had apparently panicked after an asthma attack, was rushed to a private hospital by hotel staff and died shortly after admission at 5.30pm.
Police said the singer, registered as Tang Lijun, was staying in Chiang Mai with a French male companion, who requested there be no autopsy.
Her elder brother flew to Thailand to make funeral arrangements.
Taiwanese-born Teng started singing at the age of six and came into prominence at 11 after she entered a contest organised by a Taiwanese television station.
By the time she was 21, she had captivated Asian audiences the world over, achieving cult status in Hong Kong, Taiwan, China and Japan.
Politics also played a part in her life, with her songs becoming a barometer of cross-strait relations.
The Beijing government banned her sentimental love songs in the 1980s as “spiritual pollution”, even though fans all over China still listened to her on pirated tapes smuggled from Hong Kong.
The Taipei government, meanwhile, used her songs in anti-communist propaganda broadcasts to the mainland until mainland China finally lifted the ban at the end of the decade as relations with Taiwan improved.
Teng, whose father was a Kuomintang army officer, rejected invitations to visit and perform in mainland China.
She was critical of the Chinese government over the handling of the June 4 Tiananmen crackdown. During time in France, she used to take part in concerts organised by pro-democracy activists in exile in Paris.
By then she had faded from the limelight and was no longer recording.
She has spent the past six years living quietly in France, becoming a Buddhist, only making trips back to the territory for special occasions or to appear in TV specials.
News of her death left many in show business shocked and saddened.
Concert promoter Florence Chan Suk-fun, who organised Teng’s first concert in Hong Kong in 1976, remembered her as a very professional artist who “always strived for the best quality” and was always careful about her health, especially in the past few years.
Radio and TV stations last night re-arranged programmes to pay tribute to her, with more scheduled for tonight.
In some Mong Kok record stores, prices for Teng’s CDs were raised by 20 per cent, while the more collectible old-style vinyl records were on offer for HK$700 each, a 10-fold increase.
Denny Wong Hing-keung, owner of Pop Music Laser, said he sold 150 of Teng’s discs yesterday despite the price rise, and was out of stock.