The president, Gloria Arroyo, is expected to make a full statement on Monday confirming the death and details of the operation.
Al-Ghozi, who escaped from national police headquarters in the Philippine capital in July, admitted being a member of Jemaah Islamiah, a southeast Asian guerrilla group suspected of having strong ties with the al-Qaida network, AFP said.
He was also the highest-ranking member of the banned group to have been detained in the Philippines.
The 33-year-old was accused by local police of being an expert bomb-maker and planner who had dealings with some of Asia's most wanted terror suspects. On April 2002, al-Ghozi was sentenced to 17 years jail for illegal possession of explosives and fraudulently obtaining passports.
He admitted acquiring two passports in Zamboanga in the southern Philippines by claiming he was Filipino-born. Prosecutors charged that the passports were meant for a series of bombings in Singapore.
Al-Ghozi also admitted to being involved in the bombing of a suburban train in Manila - one of a string of deadly bombings in the city in December 2000 that killed 22 people and injured more than 120.
Officials say he died in a firefight at Pigcawayan Town on the island in an operation led by police with military back-up.