Hillenburg announced in March 2017 that he was diagnosed with motor neurone disease, also known as amyotrophic lateral sclerosis.
In a statement, the children's television network said: "We are sad to share the news of the passing of Stephen Hillenburg, the creator of SpongeBob SquarePants.
"Today, we are observing a moment of silence to honour his life and work."
Hillenburg was a marine biology teacher in Southern California when he started creating sea creatures as teaching tools and had worked on SpongeBob since 1999.
In a longer statement, the broadcaster added: "We are incredibly saddened by the news that Steve Hillenburg has passed away following a battle with ALS."
They continued: "He was a beloved friend and long-time creative partner to everyone at Nickelodeon, and our hearts go out to his entire family."
"Steve imbued ‘SpongeBob SquarePants’ with a unique sense of humour and innocence that has brought joy to generations of kids and families everywhere."
"His utterly original characters and the world of Bikini Bottom will long stand as a reminder of the value of optimism, friendship and the limitless power of imagination."
As well as creating the character, Hillenburg also directed 2004's The SpongeBob SquarePants Movie.
He's survived by his wife, Karen, and his son, Clay.
The first episode of SpongeBob SquarePants, featuring the cheery yellow sea sponge and his friends who live in the fictional underwater city of Bikini Bottom, aired on television in May 1999.
The series went on to win multiple awards, produced a series of spin-off books, two Hollywood movies and a Broadway musical.
Since its premiere on children's channel Nickelodeon in July 1999, SpongeBob SquarePants has become a multi-billion-dollar global phenomenon through the series, films and merchandise.