THE 37-year-old appeared on the third series of the show in 2006 which was eventually won by Leona Lewis.
The singer-songwriter used a wheelchair after breaking her back in an accident at 13.
She lived in West Lothian, Scotland, with her partner and son.
A statement from her management company said: "It is with deep sadness we announce that Kerry passed away at home earlier today following a battle with cancer. At this time, our thoughts and prayers are with her family and friends."
Following a period of illness, the singer was diagnosed at 36 with bladder cancer in 2010.
She had worked with several charities representing women, the disabled and children. Last month she was named as an ambassador for Action on Bladder Cancer. During The X Factor she was mentored by Sharon Osborne and went out in the third week of the live finals.
Mrs Osborne said on her Twitter account last night: "So sad about Kerry McGregor's passing. Much love and respect to her and her family."
Ms McGregor had also found fame as an actress, appearing on Grange Hill and Channel 4 series The Book Group.