Margaret Olley: Celebrated Australian painter and patron of the arts

Indomitable: Olley in 2008 (EPA)

Margaret Olley had just put the final touches to more than two dozen works about to be exhibited in Sydney when she died in her sleep, "with paint still on her fingers", according to her dealer and friend, Philip Bacon. Olley was one of Australia's best loved and respected artists, a prolific painter of still lifes and domestic interiors, mostly created inside her cluttered Sydney home. She was also a leading patron of the arts, mentoring young artists and donating millions of dollars to public galleries to help them acquire works.

Famously forthright, she was a formidable figure even in her frail latter years, when she hobbled around on a walking frame, paintbrush in one hand, cigarette in the other. "It's all I've got left, darling," the artist – who gave up drinking in the 1950s – told one of her closest friends, the Australian comedian Barry Humphries, in a reference to her tobacco habit.

Born in Kyogle, in northern New South Wales, Olley grew up mainly in north Queensland during the Depression. Her artistic talent was fostered by a teacher at her Brisbane boarding school, and she moved to Sydney to study art, graduating with honours. She plunged into the bohemian arts scene, where her friends included Russell Drysdale, Sidney Nolan and William Dobell, towering figures in 20th-century Australian painting.

It was as a model that Olley first came to public attention, when a portrait of her by Dobell won the Archibald prize, the country's foremost portraiture award. That was 1948; this year, in a neat piece of symmetry, a New South Wales artist, Ben Quilty, whom Olley had mentored, won the Archibald with another portrait of her.

Olley, who never married or had children, won her first art prize in 1947 and had her first solo exhibition the following year. In 1949 she travelled to Europe, on the first of numerous overseas trips that, over the next 50 years, took her to South-east Asia, the Pacific, the Middle East and back to Europe, often to see major exhibitions. She lived in Paris for several years in the early 1950s.

The year 1959 was a turning-point; recognising that she had a drink problem that was affecting her work, Olley joined Alcoholics Anonymous. She never touched alcohol again, and from then on her paintings improved, fetching sizeable sums which, shrewdly, she invested in property. As her wealth accumulated, she became a major benefactor, donating works by the likes of Picasso, Cézanne and Bonnard to the Art Gallery of New South Wales (AGNSW) as well as regional galleries. The AGNSW named its 20th-century European gallery after her.

Olley, who once said that she gave up alcohol "in order to be able to live again", was made a Companion of the Order of Australia (AC) – the country's highest civilian honour – in 2006. A staunch monarchist, she opposed moves to make Australia a republic and, according to Humphries, wore her AC medal "on every garment, which included aprons and cardigans".

Her works were a riot of colour, often featuring flowers and objects collected on her travels. Working on several paintings at once, she would move from room to room in her home, in the inner-city Sydney suburb of Paddington. "Everyone has a thing they love to do in life – playing bridge, gardening, having children," she said in 2007. "Mine is painting, where I celebrate life."

Her long-time partner, Sam Hughes, an art dealer and theatre director, lived with her on and off in her house, where she also hosted legendary dinner parties. His death in the early 1980s, and that of friends, prompted a period of depression, which struck her again in 2001. But she came through it, and never lost her spirit despite a series of physical illnesses. She was "indomitable, difficult, determined, obsessed and obsessive", according to an old friend, Betty Churcher, former director of the National Gallery of Australia.

Olley, whose works hang in national and state collections, never stopped painting, and in recent years the grande dame of Australian art had been working, unusually for her, on a landscape: a massive panorama of Sydney Harbour, which she painted from Humphries' flat overlooking the water. She is to be honoured with a state memorial at the AGNSW; the show she was working on has been postponed until next year.

Margaret Hannah Olley, painter and arts patron: born Kyogle, New South Wales 24 June 1923; appointed Officer of the Order of Australia 1991 and Companion of the Order of Australia 2006; made a life governor of AGNSW 1997; died Sydney 26 July 2011.