Willow, a descendent of her beloved childhood pet Dookie and introduced into the Royal Family by the Queen's father George VI, was put down at the age of 14 on Sunday.
The Queen has owned more than 30 corgis since 1945 but stopped breeding them in recent years due to her age.
A Buckingham Palace source told the Daily Mail: "‘She has mourned every one of her corgis over the years, but she has been more upset about Willow’s death than any of them.
"It is probably because Willow was the last link to her parents and a pastime that goes back to her own childhood. It really does feel like the end of an era.
"Willow represents a significant thread running through the Queen’s life from her teenage years to her 90s.
"For many, many years she bred and raised corgis and to think that the last one has now gone is something of a milestone."
The source added that the Queen does not like seeing her dogs suffer and knows that sometimes putting a dog down is the kindest course of action. "Although that doesn’t make her loss any less," the source was quoted as saying.
The loss comes 18 months after the death of Holly, another corgi, who appeared alongside Willow in the James Bond sketch for the London Olympics opening ceremony in 2012.
It is understood the dog will be buried in the grounds of Windsor Castle with a headstone bearing the words: "A faithful companion of the Queen".