Doctors had declared the man as unfit for detention or deportation but he spent nearly three weeks in the privately-run Harmondsworth centre by London Heathrow Airport.
Media reports named him as Alois Dvorzac. Medical notes said the Alzheimer's disease sufferer was frail and required social care. He was taken to hospital in handcuffs and had been in them for five hours when he died.
His death is among the "shocking cases where a sense of humanity was lost", Her Majesty's Inspectorate of Prisons (HMIP) said in its report on an unannounced visit to Harmondsworth in August.
HMIP described some of the rooms at the 600-capacity west London detention centre as overcrowded, dirty and bleak.
The report said 11 detainees had been held at Harmondsworth for more than a year.
Some people in detention "had been utterly failed by the system", said Nick Hardwick, the chief inspector of prisons.
"In the worst case, this frail, elderly Canadian gentleman with dementia died in the most undignified and disgraceful circumstances possible."
Dvorzac was refused entry to Britain at London Gatwick Airport on January 23 last year. After a stay in hospital, he was detained at Harmondsworth, where on January 30 a doctor declared him unfit for detention. He died on February 10.
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