Police said Azahari bin Husin, a Malaysian, blew himself up, apparently to avoid arrest, during the 9 November raid on a suspected terrorist hideout in Malang, a resort town southeast of the capital, Jakarta.
In Friday night's announcement, the State Department said Indonesian police had killed Azahari, a leader of the Jemaah Islamiya, a group affiliated with Osama bin Laden's al-Qaida network.
"The US embassy reminds Americans in Indonesia of the continued serious security threat to Americans and other Westerners in Indonesia," the statement said. It said the State Department "continues to warn US citizens to defer non-essential travel to Indonesia".
The warning said examples of the heightened threat included discovery in last week's raid of 35 bombs, prepared and ready to use.
Police also found a videotaped threat from a hooded terrorist threatening attacks against Americans, Australians, Britons and Italians, the warning said.
It said the embassy recently discovered a website that provided detailed instructions in Indonesian about how terrorists could attack and kill individual Westerners on the streets of Jakarta.
"The new information shows that terrorists are likely now planning to attack Westerners riding in cars or walking on streets, sidewalks or pedestrian overpasses in Jakarta"
US State Department
It mentioned specific locations known to be frequented by many Western pedestrians, including hotels, office buildings with international tenants and pedestrian overpasses.
"The new information shows that terrorists are likely now planning to attack Westerners riding in cars or walking on streets, sidewalks or pedestrian overpasses in Jakarta," the State Department said. "The embassy considers that the information on the website was developed by persons with serious terrorist intent."