Hussain is an alleged trainer of suicide bombers.
Another security official said ground forces had surrounded Kotkai for the past three days as jets and helicopter gunships strafed fighters' positions.
"Security forces entered Kotkai late on Friday after they had secured important heights behind it," the official said.
The army has promised to make the Taliban leadership a particular target of their offensive and sealed off the main road into Koktai last weekend.
In another development, a suspected US missile attack in Pakistan's semi-autonomous tribal belt bordering Afghanistan has killed 14 suspected fighters and injured several more, officials said.
Missiles believed to be fired by a US-operated pilotless aircraft on Saturday hit a hideout of Maulvi Faqir Muhammad, a senior Pakistani Taliban commander in the Damadola area in Bajaur tribal district.
"Fourteen militants, including foreign fighters, were killed in the attack that destroyed the fortified structure," a Pakistani intelligence official said.
The region has become a stronghold for fighters who fled Afghanistan after the US-led invasion toppled the Taliban rulers in neighbouring Afghanistan in late 2001.
Although the Pakistan government has said the ongoing South Waziristan offensive will deal a decisive blow to the fighters, they have apparently succeeded in carrying out repeated retatliatory attacks.
On Friday, a bomb attack outside a Pakistani air force base near Islamabad, the federal capital, killed eight people, including six civilians and two air force personnel.
Separately, an explosion killed at least 17 people travelling on a bus to a wedding in the northwestern Mohmand region.
In a third violent incident, a large car bomb struck in a restaurant car park in the city of Peshawar, the main city of NWFP province, wounding about 10 people."
Al Jazeera's Alan Fisher, in Islamabad, said: "Everywhere, as far as the Taliban is concerned, is a legitimate target if it involves the security forces, the police and the army.
"Everyone is wary of what will happen next and because of this the prime minister [Yusuf Raza Gilani] has summoned a special security meeting in Islamabad which will take place today.
"He has summoned senior advisers and politicians, including representatives from the provinces and also people who can feed into the process, to see how they can try to cope with the problems that they are facing."
Gilani condemned the Kamra attack and vowed that the government would not waver in its resolve to "root out terrorism".
"They knew that when the South Waziristan offensive started that there was always the possibility of a backlash and that's what we are seeing," our correspondent said, referring to the Pakistani authorities.
"[The government] is aware that they have to do something, because people are scared. You can see it on the streets, in the fact that there is not as much traffic around as usual, that the markets are quieter, cinemas across the country are reporting that attendances are down."
Our correspondent said the army officers believe that if they can confront and defeat the Taliban in South Waziristan, then other groups around the country will adapt to the new realities.
"It's a risky strategy," he said. "If it fails, it allows others to push on with their agenda and carry out attacks."