Indonesian police shot dead Dulmatin, wanted in the suicide bombings that ripped apart two night clubs in Bali that killed 202 people, and two others in a series of coordinated raids in southern Jakarta on Tuesday.
The raids are a coup in the country's fight against Islamist radicals ahead of a visit by U.S. President Barack Obama later this month.
Dulmatin, an electronics specialist who also trained in Afghanistan, was a top bomb technician for the Southeast Asian Islamist militant group, Jemaah Islamiah.
The U.S. government had a $10 million reward for the capture of Dulmatin, who is said to have been wounded after escaping a raid by Philippine security forces in 2006.
Indonesia's counter-terrorism unit, Detachment 88, has launched raids across the archipelago following the discovery of a militant Islamist training camp in Aceh last month.
Dulmatin was thought to be working with the al Qaeda-linked Abu Sayyaf group in the Philippines, said Noor Huda Ismail, an Indonesian expert on radical Islamist groups.
Since the 2002 Bali bombings, Indonesian authorities have captured or killed around 440 militant suspects, with around 250 convicted in courts and three executed by firing squad.
Australia congratulated Indonesia on Wednesday over the raids which killed Dulmatin, but Prime Minister Kevin Rudd told Indonesia's leader he could not ease tough warnings of more extremist attacks in the country.
The latest raids could strengthen Jakarta's arguments for a resumption of frozen U.S. military aid for Indonesia's Kopassus special forces, as talks were "still under discussions" ahead of Obama's visit, a spokesman for Yudhoyono told Reuters.