Gastao Salsinha had led one prong of a daring twin attack in February on residences of the president and prime minister.
The Australian reported people in Timor-Leste were hopeful Saturday the surrender would bring an end to the violence that has been taking place the past two years.
Salsinha was wanted for planning the ambush, which failed to kill Prime Minister Xanana Gusmao but left President Jose Ramos-Horta seriously wounded. Ramos-Horta has since recovered from his wounds.
The newspaper said Salsinha agreed to surrender at a house near Gleno. The priest acted as a go-between with the rebel and the government commandos who had surrounded the home.