Mohammed, 38, was killed at a Somali checkpoint in Mogadishu, Kenyan and US officials said.
Mohammed, a citizen of both Kenya and Comoros, was long sought in Somalia for his alleged role in the 1998 bombings of US embassies in Kenya and Tanzania.
US Secretary of State Hillary Clinton called Mohammed's death "a significant blow to al Qaeda, its extremist allies and its operations in East Africa."
"It is a just end for a terrorist who brought so much death and pain to so many innocents in Nairobi, Dar es Salaam and elsewhere -- Tanzanians, Kenyans, Somalis, others in the region and our own embassy personnel," she said.
American officials also believe Mohammed was involved in attacks on an Israeli-owned hotel and airliner in Kenya in 2002, and have offered a reward of up to USD 5 million for information leading to his apprehension or conviction.
Mohammed was stopped at a roadblock manned by forces of the Somali transitional government, but he sped through, forcing the troops to shoot him.
Mohammed's death is another blow to al-Qaeda and its affiliates as it comes just over a month after Osama bin Laden was killed in a US raid in the Pakistani garrison city of Abbottabad on May 2 and the death of Ilyas Kashmiri in a US drone strike in Pakistan's restive South Waziristan tribal region on June 3.