An Interior Ministry statement said Dadullah was killed in fighting with security forces in Helmand's Girishk district on Saturday night.
Officials from Nato and the US-led coalition could not confirm it and Bays says a Nato source had told him privately that there was still some confusion over the reports but that they did believe the body was Dadullah.
Bays said the Taliban was still confused over whether Dadullah had been killed. Some sources had confirmed the body was his while some others said it was another military commander who also happened to only have one leg.
A Taliban spokesman had earlier rejected the government's claim labelling it "propaganda".
Standing next to the body Bays said that although he had never met Dadullah face to face, the corpse was either him or someone bearing a striking resemblance to him.
Television stations interrupted routine broadcasting to give breaking news of the killing.
'Commander of commanders'
Dadullah is the most important rebel commander to be killed since the Taliban was driven from government by a US-led coalition in late 2001, the Afghan intelligence department said.
Asadullah Khalid, the Kandahar provincial governor, said Dadullah was killed "in an operation carried out based on very accurate information."
Sayed Ansari, the Intelligence agency spokesman, described him as the "biggest Taliban commander ever killed."
"He was the commander of commanders," he said.
Dadullah was known as the key military strategist in Taliban and was said to be close to Mullah Mohammad Omar, the fugitive Taliban supreme commander.
He has bragged to the media about having thousands of men at his command, including hundreds of suicide bombers.
Source: Al Jazeera and agencies