Mugabe, 95, died Friday morning in Singapore where he had been receiving medical treatment since April, the Xinhua news agency reported.
In an address to the nation, Mnangagwa declared days of national mourning until Mugabe is buried.
"Our party, ZANU-PF, has met and accorded him national hero status which he earned and richly deserves," Mnangagwa said.
He also thanked the government of Singapore for the medical care it extended to the leader until his death.
In a glowing and moving tribute, Mnangagwa praised Mugabe for his great contribution and dedication to the development of the country before and after independence.
He described Mugabe as a great teacher, mentor and "remarkable statesman of our century."
"Zimbabwe is free, has been free since 1980 thanks to the sacrifices of a generation of dedicated, veteran nationalists and freedom fighters pre-dating the 1960s who included the late Cde Mugabe," Mnangagwa said.
He lauded Mugabe for his signature policy of reconciliation and forgiveness with former colonizer Britain soon after independence in 1980.
He also commended him for spearheading the land reform program under which Zimbabwe repossessed its land from minority white farmers.
"The late Republic icon will eternally be remembered and honoured for the bold and historic land reform program which he undertook.
"Through this program, indigenous Zimbabweans regained their long denied land rights to complete their sovereignty. For that, he was especially vilified, shunned and punished by those who stood to lose from an end to colonial rights and from a just reassertion of African rights," Mnangagwa said.
He vowed to continue with Mugabe's long-life vision and legacy of black empowerment.
"As we mourn the passing on of our commander, liberator, founder and leader, we remain determined to carry forward the transformation he so fervently desired including protecting and defending the gains of the struggle for which he made huge sacrifices."
"On the backdrop and solid foundation of the First Republic which he molded as its leader, we toady recover and grow our economy brick by brick until his life-long vision of an empowered people is realised," Mnangagwa said.
( With inputs from IANS )