Does Itachi Uchiha die?
Yes. Itachi does indeed die.
Note: the following information was given by Tobi (Madara), who
has already shown that he lied during the story (saying that he
didn't summon the Kyubi), this story might be false as well.
After being ordered to by the Konoha Management, Itachi (with
the help of Madara) eliminates his entire clan, save his little
brother Sasuke, of which he couldn't bring himself to kill.
After eliminating his clan, he runs from the village, and joins
Akatsuki. He wanted Sasuke to keep viewing him as a bad person, and
he could also gather information on the inside in case it will be
When Itachi and Sasuke fight, Itachi is already very ill, and
mostly blind by the Mangekyou Sharingan. Sasuke eventually wins the
battle. Itachi pokes him on his forehead like he used to do when
Sasuke was younger (transferring his powers to Sasuke to protect
him), and then dies.
Tobi later on tells him the story of the Uchiha clan, how Itachi
was forced to kill his own clan, and Sasuke now intends to destroy
Konoha for what they did to his brother.
Itachi let Sasuke kill him, because when Itachi dies you'll
notice that Itachi uses a very strong power that can kill Sasuke.
Instead of using it to try to kill Sasuke he used it to free Sasuke
from Orochimaru's curse mark. Itachi let Sasuke win because he
loved him and he wanted to let Sasuke get his revenge.
He wanted Sasuke to come out as a hero and appear more