The 47-year-old was at a restaurant just outside Pretoria when an armed robbery took place, where it is understood that he was shot in the stomach.
Sanders, who had not fought since 2008, was taken to hospital for further treatment, but after an eight-hour battle, he died of his wounds.
An eyewitness, speaking to The Sowetan newspaper, said: "There were three of them. Armed with pistols. They were telling everyone to lie down and give them their wallets and mobile phones. They didn’t take much. They were working their way through the room when a car alarm went off outside and they panicked and ran.
"Corrie was the only one shot. He didn’t try anything heroic as far as I could see. He was just in the wrong place, by the entrance. They shot him through the stomach and I also saw a wound in his arm, it might have been from the same bullet, which went right through him.”
Harold Volbrecht, Sanders’ former coach, struggled to put into words the loss of his friend.
“It’s very sad. My heart is broken. It’s just terrible. I can’t believe it happened.”
Sanders secured a stunning second-round knockout win over Wladimir Klitschko in 2003, sending the current world champion to the canvas four times en route to victory in Germnay.
He next fought Vitali Klistchko a year later in Los Angeles for the vacant WBC heavyweight title, but lost that by a TKO in the eighth round.
Police in South Africa are investigating the events.