Lord Hooson, who has died aged 86, served as the Montgomeryshire MP between 1962 and 1979.
He was also a leading QC and represented child killer Ian Brady in the Moors murders trial in the 1960s.
The Welsh Liberal Democrat leader Kirsty Williams said he was a steadfast Liberal who cared for Montgomeryshire.
Fellow Lib Dem peer Lord Roberts of Llandudno described Lord Hooson as "possibly the most outstanding Liberal of his generation", while Montgomeryshire's Conservative MP Glyn Davies said Wales had lost one of its greatest citizens.
Lord Hooson was educated at Denbigh Grammar School and Aberystwyth University before becoming a QC in 1960 and later a judge.
In 1995, he was appointed chairman of fashion firm Laura Ashley, a company with strong ties to his former constituency.
He became MP for Montgomeryshire in a by-election in 1962, following the death of the former Liberal Party leader Clement Davies.
Five years later he contested the party leadership, but withdrew in favour of the eventual winner Jeremy Thorpe.
By the time of the 1979 General Election Montgomeyshire had been a Liberal stronghold for 99 years, but Lord Hooson lost his seat to his Conservative opponent Delwyn Williams.
He was later appointed a life peer as Baron Hooson of Montgomery.
Brecon and Radnorshire AM and Welsh Lib Dem leader Kirsty Williams said: "Emlyn Hooson was respected in the House of Lords and the wider political community for his passionate liberalism, his love of Wales and his sharp intellect.
"Not only will he be remembered for his high profile legal work, he will also be remembered for establishing the Welsh Liberal Party in Wales - something we are still proud of today.
"He was a steadfast Liberal who cared for the people of Montgomeryshire and Wales. Emlyn was also a fervent advocate of Welsh culture and music having been president of both the national and international eisteddfod."
Lord Roberts of Llandudno said Lord Hooson was "possibly the most outstanding Liberal of his generation" and "a man of outstanding brilliance".
"He was the founding father of the Welsh Liberal Party," he added.
"He was MP for Montgomeryshire - one of a trio of eminent lawyers to represent the constituency - Clem Davies before him and Alex Carlile subsequently.
"When I became a member of the House of Lords he was my mentor - also my guide in making Parliamentary contributions.
"Wales has lost a man of outstanding brilliance, not only in politics but in law."
Montgomeryshire MP Mr Davies said Wales had lost one of its greatest citizens.
He added: "He served the constituency and Wales for decades. Despite being in different parties, we never had a cross word.
"In many ways he was gentle in his approach to things, but he was very determined and had a very sharp mind.
"I had been to see him over last few weeks and it was fascinating to hear him talk about the conversations he'd had during his lifetime with the likes of Lloyd George, Winston Churchill and Aneurin Bevan.
"He was a great personal friend of mine and he will be sadly missed."
Lord Hooson had a close interest in the cultural and musical life of Wales, and was president of the National Eisteddfod of Wales at Newtown. In 1966 and the following year, he was made Honorary White Bard of the National Gorsedd of Bards.
He was president of the International Musical Eisteddfod in Llangollen between 1987 and 1993.
At various times, he was Liberal Party spokesman in the Commons on defence, foreign and home affairs, legal matters, agriculture and Wales.
Plaid Cymru leader Ieuan Wyn Jones said he first remembered him when he was campaigning for a Yes vote in the 1979 devolution referendum.
"He was a passionate advocate of greater powers for Wales," said Mr Jones.
"He came from a well known Vale of Clwyd family. I also lived in the area for many years and I remember long discussions with him about the politics, history and culture of the vale. He was extremely knowledgeable about such matters.
"He will be missed and remembered as someone who made a valuable contribution to our strengthening democracy in Wales."
Warm tributes have been paid to the Liberal Democrat peer Lord Emlyn Hooson, described as the "founding father of the Welsh Liberal Party".