"Al Jazeera's Step Vaessen, reporting from Jakarta, said that it was an emotional news conference by the police chief.
"When he finally announced that Noordin M Top was dead people started cheering and clapping," she said.
Counter-terrorism troops searching for suspects involved in the the attacks on the Ritz-Carlton and JW Marriott hotels, which left nine people dead and 53 wounded, sealed off the area in a suburb of Solo city late on Wednesday.
Shooting could be heard overnight before an explosion around daybreak.
Indonesian television showed footage of a burnt-out house, with no roof and blown-out walls after the raid.
Nanan Soekarna, the national police spokesman, said that "explosives, weapons, and a grenade" had been found in the house.
A woman was injured in the raid and is being treated at a hospital in Solo, police said.
The besieged property was rented several months ago by a young couple who work as teachers at an Islamic boarding school and a kindergarten, Suratim, a local village chief, said.
Analysts believe that Top and his associates frequently used safe houses in Central Java, helped by a network of sympathisers in the area.
Sidney Jones, a senior adviser with the International Crisis Group think tank, told Al Jazeera that Indonesian officials would be pleased with the success of the operation.
"They are very proud of what they have achieved and they believe this will make a major dent in Indonesia's terrorist networks," she said.
"He [Top] was very clearly trying to be an Indonesian replica of Osama bin Laden. He was the one major terrorist in Indonesia who was following Bin Laden's directive of workig to wage war on America and its allies wherever possible."
Top is believed to be head of a splinter group with connections to Jemaah Islamiyah, a group fighting for an Islamic state in Southeast Asia.
In a 2005 video, he claimed to be al-Qaeda's representative in Southeast Asia and to be carrying out attacks on Western civilians to avenge Muslim deaths in Afghanistan.
Top was wanted in connection with the Bali bombings in 2002, which killed more than 200 people, and a number of other deadly attacks.
Peter Hughes, a survivor of the Bali bombing in 2002, told Al Jazeera: "I guess after seven years we have got some small justice.
"I tend to think that if he's not around others might stop and think 'we won't go forward with what his radical thoughts were'," he said.
Hughes praised the police for tracking down Top.
"I take my hat off to them. After seven years ... they have brought about a good result."
Several suspects in the July 17 bombings have been detained or killed in raids in recent weeks, but the authorities are still searching for several operatives believed to have planned the operation and recruited the bombers.