Abdi Awale Qaybdiid had continued fighting after other militia leaders from a US-backed alliance were defeated and the capital Mogadishu was captured by fighters of the Islamic courts militia.
"It has become necessary to surrender and give peace a chance," a militiaman loyal to Qaybdiid said.
The Islamists called on all their remaining rivals to surrender and called for Somali unity.
Sheikh Sharif Sheikh Ahmed, the leader of the Islamic courts union, said: "We need to overcome tribalism and the Somali enemies. There are so many enemies and in order to defend ourselves against them we need to unite."
At least 140 people were killed and 150 others wounded during the two days of fighting, Ali Moallim, a senior administrator at Madina hospital, said.
Militia sources said Qaybdiid agreed to surrender after talks between the Islamists and elders from a part of his clan. Scores of his fighters did the same.
Qaybdiid's allies would not discuss his whereabouts.
Witnesses said Qaybdiid's surrender meant that the Islamists controlled all of Mogadishu except for a small area near the presidential palace, overseen by fighters loyal to Hussein Aideed, the interior minister.
Another militia commander, Mohamed Dheere, handed over his weapons and about 420 militiamen to the internationally recognised interim government in Baidoa, about 240km northwest of Mogadishu.
"I can confirm that Mohamed Dheere has arrived in Baidoa. He has handed over his militias and around 35 technicals," government spokesman Abdirahman Dinari said, referring to the armed pickup trucks that are Somalia's version of tanks.
Islamists forced Dheere out of his stronghold in Jowhar, north of Mogadishu, last month.
The authority of the interim government is limited. It was formed at peace talks in Kenya in 2004 but is based in Baidoa because it is too weak to go to Mogadishu.
Relations between the interim government and the Islamic courts union are tense over the issue of foreign peacekeepers, which the government wants to help it establish authority and the Islamists have refused.