Yemeni troops killed the second in command of Al-Qaeda in the Arabian Peninsula, regarded by Washington as the jihadist network's deadliest branch, in a raid in the east, the defence ministry news website said.
"The Saudi terrorist Saeed al-Shehri, the second man in Al-Qaeda, was killed in a quality operation by the armed forces in Hadramawt," the 26sep.net news website reported.
"Six other terrorist elements accompanying him were also killed," it added quoting what it said was a "high-ranking source," without mentioning when the operation took place.
"Shehri's death deals a painful blow to what's left of the terrorist elements."
A tribal source told AFP that a ground operation had taken place in the province of Hadramawt, where the family of Al-Qaeda's slain founder Osama bin had its roots.
AFP however could not independently confirm his death.
Shehri escaped death on September 20 last year when US drones carried out several air strikes on the village of Al-Mahfad in Abyan province in the south.
He was released from Guantanamo in 2007 and was flown to Saudi Arabia where he was put through a rehabilitation programme.
But after completing the programme, Shehri disappeared and later resurfaced as the second man in AQAP, which has been repeatedly described by US officials as the most dangerous of the jihadist network's worldwide affiliates.
Saudi and Yemeni Al-Qaeda branches had merged to form the Yemen-based AQAP, announced in January 2009.
AQAP has been linked to the 2009 Christmas plot in which a bomb hidden in a Nigerian attacker's underwear failed to detonate on a plane bound for Detroit.
It is also suspected of having a hand in a 2010 attempt to blow up cargo planes heading to the United States with explosives concealed in printer cartridges.
In October 2000, an Al-Qaeda suicide attack on the USS Cole in the port of Aden killed 17 US service members.
Fahd al-Quso who was wanted in connection with the bombing was killed in a US drone strike in May.
In 2011, AQAP took advantage of the weakness of the central government in Sanaa during protests against ousted president Ali Abdullah Saleh to expand its presence in the impoverished country.
It took over a string of towns across the south and southeast, mainly in Abyan.
But in May, the army launched an all-out offensive, forcing Al-Qaeda to withdraw from towns in Abyan as suspected US drone attacks in southern Yemen have targeted Al-Qaeda insurgents.
Saleh's successor President Abdrabuh Mansur Hadi has pledged to crush the militants since he came to power in February.