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.
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.