Ferman had barricaded himself in the room after seriously assaulting the guards about 11am at the facility near Castlemaine.
The Coroner has been called and is expected to investigate if the man had a reaction to tear gas or capsicum spray.
The prison was put into lockdown after the incident, in which one guard is believed to have lost six teeth, and suffered a broken nose and a “significant gash” to his face.
One officer was sent to Castlemaine Health, while the other was sent to Bendigo Base Hospital.
It is understood the officer with the less serious injuries has been discharged from hospital.
Ferman was sentenced to more than six years’ prison in 2012 after he was found guilty of extortion and threatening to kill a Coburg motor mechanic.
When arrested in July 2010, Ferman was found with a loaded semi-automatic handgun. A search of his car uncovered a tomahawk, a sawn-off rifle and silencer.
He has an extensive criminal history that dates back to 1998 and includes convictions for armed robbery, assaults, drug trafficking and weapons charges.
In 2007, Ferman was cleared by a magistrate of murdering drug dealer Mark Mallia. Drug kingpin Carl Williams was eventually convicted for the murder.
The dispute at Loddon Prison on Thursday morning is believed to have started when Ferman refused a request by guards to leave his accommodation unit at the 236-bed Middleton unit.
The guards were instructed to extract Ferman from the building when they were attacked.
A spokesman for Corrections Victoria confirmed a 35-year-old male prisoner at the Middleton annexe died on Thursday afternoon.
“Following an earlier incident where two staff members were injured, the prisoner refused to leave his room and was subsequently removed,” he said.
“Shortly after the prisoner collapsed, with medical attention immediately provided. Police attended the site and are investigating.”
The matter will be referred to the Coroner to formally determine a cause of death.
Ferman was close to the end of his custodial sentence after serving most of his sentence at maximum-security facilities including Barwon Prison.