Official daily al-Masaa' said Saturday that Abdel Malek Dardakal, code-named Abu Musab Abdel Wadoud, died in fighting a month ago with rival gunmen led by Ali Lacondition in the Zabarbar mountains, 75 miles east of Algiers.
It said in addition to Wadoud, 15 of his followers were killed in the fighting.
The Salafi group was established in 1998 by the late Islamic leader Hassan Hattab. He was killed in fighting with government forces.
The Muslim extremist group, responsible for Algeria's highest profile terrorist attacks, rejected the policy of repentance.
It was demanded in return for general amnesty by President Abdel Aziz Boutefliqa in an effort to end a political crisis that has plagued Algeria for more than a decade.