Lieutenant General Issam al-Shaikh, the commander of North Sinai security police, said that Nasir Khamis al-Mallahi, the leader of the Monotheism and Jihad group, was shot and killed in a gun battle with police on Tuesday morning.
Police surrounded an olive grove in al-Karama district, south of al-Arish, after receiving a tip-off that al-Mallahi and an accomplice were hiding there, al-Shaikh said.
"This is a major blow to the terrorist group," al-Shaikh said.
Al-Mallahi, who was believed to be 30 years old, was wanted for the attacks in Dahab last month.
His group is also accused of carrying out the attacks in the Sinai resorts of Taba and Ras Shitan in October 2004, and in Sharm al-Shaikh in July 2005.
His accomplice, Muhammad Abd Allah Abu Grair, was arrested unhurt, al-Shaik said.