Demme was rushed to the emergency room of UCLA Medical Center in Santa Monica when he collapsed after playing in a celebrity basketball game for the NBA Entertainment League at the private Crossroads School. He was pronounced dead at 5:28 p.m.
The Los Angeles Coroner's office says the cause of death is not yet known and an autopsy will be conducted.
During his brief career, Demme (the nephew of famed Silence of the Lambs director Jonathan Demme), went from producing the seminal MTV hip-hop show Yo! MTV Raps in the late '80s to launching a film career of his own.
Despite the famous last name, Demme, born October 26, 1963, started his career from the bottom rung, working as a production assistant at MTV before going on to create Yo! MTV Raps and directing other spots, including the cable network's infamous famous black-and-white rants starring then-unknown cigarette-sucking funnyguy Denis Leary.
While Demme's big-screen career had a somewhat inauspicious start--directing MTV goofballs Ed Lover and Dr. Dre in Who's the Man?--the filmmaker went on to helm 1994's cult comedy hit The Ref, the romantic ensemble comedy Beautiful Girls, Eddie Murphy and Martin Lawrence's prison comedy Life and, most recently, Blow, the 2000 biopic of drug trafficker George Jung starring Johnny Depp and Penélope Cruz.
He also had an extensive TV résumé: He shared an Emmy for producing 1999's A Lesson Before Dying, and he also directed 1999's critically hailed (but short-lived) Fox comedy Action! and Denis Leary's 1992 TV special No Cure for Cancer.
"Last night, I lost one of my closest friends in the world," Leary said in a statement. "Ted Demme was a great friend, father and husband, a man whose talent was matched only by his incredible passion for life. My thoughts today are with his wife Amanda and their children. I will miss him dearly."
Through much of his career, Demme's relationship to uncle Jonathan seemed both a blessing and a burden in Hollywood. The pair worked together on several projects, teaming up to direct Bruce Springsteen in his classic video for "Streets of Philadelphia" and partnering on the Jonathan Demme-produced HBO series, Subway Stories. At the same time, that connection also led some critics to take family-related jabs at Ted Demme's work behind the camera; one Entertainment Weekly critic once dubbed Demme's Subway Stories short film "nepotism at its worst."
Still, being forever linked to his Oscar-winning uncle didn't seem to bother Demme.
"You know, I think everything I do cinematically for the rest of my life will probably have some direct route back to Jonathan," he said in a 1996 interview with the movie publication FilmZone. "But I love him to death. He's like my best friend and my big brother. He's been my manager and mentor since I've gotten into entertainment, and I admire the s--t out of the choices he's made and the work he's done. So no matter what I do, on any level there's always some Jonathanism that's in my blood which I'm very proud of and have no problem with."
Demme had been preparing to direct the upcoming Nautica, starring Ewan McGregor and Heath Ledger in the story of a murder that takes place on a yacht in the Carribean.
Demme is survived by wife Amanda Scheer-Demme (the music supervisor for many of his films), a 4 1/2-year-old daughter and a two-month-old son, as well as his sister and both of his parents. Funeral arrangements have not yet been set.
(updated at 4:10 p.m. PT)