Abu Azzam, a financier and religious aide to Abu Musab al-Zarqawi and leader of al-Qaeda's operations in Baghdad, was killed by American and Iraqi special forces while sheltering in a block of flats, having apparently been betrayed by an al-Qaeda insider.

In a separate development, Iraqi police found the decomposing bodies of 22 Iraqi men near Kut, 100 miles southeast of Baghdad. They had been bound, blindfolded and shot in the head in what appeared to be another in a series of sectarian killings.

A US military spokesman said that Azzam had been traced thanks to "multiple intelligence sources and information from a close associate", adding: "During the operation, which was held with the intent of capturing him, he fired and he was killed by return fire."

It was unclear why, for such a senior operative, Azzam had a bounty of a mere $50,000 (£28,000) placed on his head by the US in a list of Iraq's 29 most-wanted terrorists. Other bounties ran to several million dollars.

American and Iraqi officials have frequently claimed to have killed or captured top lieutenants of al-Zarqawi in Iraq, though al-Qaeda's subsequent ability to strike against targets across the country has scarcely been impaired.

Azzam, whose real name is Abdullah Najim Abdullah Mohamed al-Jawari, may be more significant. The Iraqi-born terrorist was an able field commander who had claimed to be behind the assassinations of several leading politicians, including the car bomb that killed Izzadine Saleem, president of the US-appointed Governing Council, in May last year, and an attack in July that year that killed the governor of Nineveh province.

The US military said that Azzam had been al-Qaeda's "emir" in Anbar province, heartland of the Sunni insurgency, until the spring, when he became al-Qaeda's operations chief in Baghdad, and had overseen the upsurge of violent attacks in the city.

A suicide bomber attacked a police station in Baquba, 30 miles north of Baghdad, yesterday, killing nine and bringing the death toll during the past three days to at least 62.

Al-Zarqawi is known to have deputed his leadership to al-Qaeda regional commanders, known as emirs. As well as co-ordinating the finance, logistics, planning and operations for their commands, these emirs work with propaganda officers who broadcasting al-Qaeda's "successes" to mobilise support and funding