He was 87.
Talbot first took charge of the team in the 1960s but his biggest successes came when he returned to the role in 1989 after stints in Canada and the United States, and as the first head of the Australian Institute of Sport.
He drove the Australian team to success through the 1990s and early 2000s with his swimmers capturing 18 medals, five of them gold, at the Sydney Olympics in 2000.
Australia won 13 gold medals at the world championships in Fukuoka the following year.
"Don Talbot was at the helm of Australia's golden swimming era," Sport Australia Hall of Fame Chairman John Bertrand said in a statement on Wednesday.
"A coaching magician who returned the Australian national squad to its best results in over 30 years at the Sydney 2000 Olympics, he changed the way people thought about high performance.
"We have much to thank Don for and his legacy will remain as one of Australia' most successful swimming coaches and a true inspiration.
"He will be missed by all, in and out of the pool around the world."
Talbot initially trained as a teacher and was known as a strict disciplinarian but was also fiercely loyal to his athletes, even paying his own way to support John and Ilsa Konrads at the 1960 Tokyo Olympics.
He went to every subsequent Olympics as part of the Australian team until 1976 when he moved to Canada, eventually guiding them to second on the swimming medals table at the 1984 Los Angeles Games with four golds and 10 in total.
Talbot returned to Australia as head coach in 1989 and re-established the nation as a swimming powerhouse before retiring after the 2001 world championships.
(Reporting by Greg Stutchbury in Wellington; Editing by Peter Rutherford)