Raye's final years were spent dealing with ongoing health problems. She suffered from Alzheimer's disease and had lost both legs in 1993 due to circulatory problems. She died of pneumonia on October 19, 1994, after a long history of cardiovascular disease. Raye was 78 years of age, and residing in Los Angeles at the time of her death.
On November 2, 1993, Martha Raye was awarded the Presidential Medal of Freedom, by President Bill Clinton, for her service to her country. The citation reads:
"A talented performer whose career spans the better part of a century, Martha Raye has delighted audiences and uplifted spirits around the globe. She brought her tremendous comedic and musical skills to her work in film, stage, and television, helping to shape American entertainment. the great courage, kindness, and patriotism she showed in her many tours during World War II, the Korean Conflict, and the Vietnam Conflict earned her the nickname "Colonel Maggie." The American people honor Martha Raye, a woman who has tirelessly used her gifts to benefit the lives of her fellow Americans."
In appreciation of her work with the USO during World War II and subsequent wars, special consideration was given to bury her in Arlington National Cemetery upon her death, however, at her request, she was ultimately buried with full military honors in Fort Bragg, North Carolina.