Omar al-Faruq was shot and killed after he opened fire on British soldiers attempting to arrest him, Major Charlie Burbridge said on Monday.
The US has described al-Faruq, a Kuwaiti born to Iraqi parents, as the “top al-Qaeda operative in southeast Asia”.
Burbridge said: “During the attempted arrest Omar Faruq was killed, which is regrettable because we wanted to arrest him.”
Al-Faruq, who is believed to have been the main link between bin Laden’s followers and the Jemaah Islamiah group, was being held at Bagram airbase in central Afghanistan over a spate of bombings in Indonesia until he escaped in July 2005.
A few months later, he was seen talking about the attacks with three other escapees on a video broadcast in October 2005 on al-Arabiya television.
The four said they had plotted their escape on a Sunday when many Americans on the base were off-duty. One of the four, Muhammad Hassan, believed to be Libyan, said he had picked the lock of their cell.
In the video, apparently filmed in Afghanistan, the men show fellow members a map of the base and the location of their cell.
Washington did not admit he had escaped until November, when defence lawyers demanded he should be produced as a witness at the trial of a US army sergeant accused of abusing prisoners in Bagram.
US officials were then obliged to reveal that he could not testify because he had escaped.
An Iraqi police officer said on condition of anonymity that al-Faruq had entered Iraq three months ago, was known to be an expert in bomb making, and went by the name Mahmud Ahmad while in Basra.
A top security consultant in Indonesia, Ken Conboy, told AP last year that al-Faruq joined al-Qaeda in the early 1990s and had trained in Afghanistan for three years.
Previous to this training he had tried to enroll at a flight school in the Philippines with the intention of commandeering an airplane on a suicide mission, but was unsuccessful with his application.
He later plotted to stage car and truck bombings at US embassies across southeast Asia on or near the first anniversary of the September 11 attacks, but the plan was thwarted by his capture, Conboy said.
It was not known why al-Faruq fled to Iraq, but officials have said he was born in Kuwait to Iraqi parents.
In the interview last year, Conboy played down concerns that al-Faruq would go to southeast Asia.
“He’s Iraqi after all. If he’s not hiding out [in Afghanistan or Pakistan], he’s probably headed to Iraq to join the fight there,” Conboy said then.