A leading al-Qaeda operative has been killed in a rocket attack on a mud-walled compound on Pakistan's mountainous border with Afghanistan, it was reported today.

Aftab Ahmed Khan Sherpao, Pakistan's Interior Minister, said that the death of Abu Hamza Rabia - who commanded the network's international operations - was a major coup for the 'war on terror'.

Hamza, a 38-year-old English-speaking Egyptian, was considered to rank third in the network's hierarchy, behind Osama Bin Laden and Ayman Zawahiri, and carried a $5 million bounty. He was implicated in two assassination attempts on President Pervez Musharraf and the plotting of the 9/11 attacks on America.

Sherpao said that at least four other people including two Syrian security guards were killed when a missile blew up bomb-making materials, grenades and other munitions stockpiled in the compound in tribal North Waziristan. Locals described a streak of white light followed by a giant explosion.

But reports of Rabia's death, which President Pervez Musharraf said was "500 per cent confirmed", were contradicted by local tribesmen. Haji Mohammad Siddiq told Reuters that his 17-year-old son and an eight-year-old nephew were killed in the blast. He said there were no militants present.

"We were sleeping when I heard two explosions in my guest room. When I went there I saw my son, Abdul Wasit, and my eight-year-old nephew, Noor Aziz, were dead," he said. "There were no foreigners in my house. I have nothing to do with foreigners or al-Qaeda."

Officials say that the bodies of the two locals were found in the house, but that those of the foreigners, including Hamza, were believed to have been taken away.

The respected Al-Arabiya satellite news channel said that it had been contacted by a person claiming to represent al-Qaeda denying that Hamza was dead.

The US has been reluctant to confirm any details of the attack. There is sensitivity over the extent to which it is involved in military activity in Pakistan and particularly its unconfirmed use of unmanned Predator drones.

Stephen Hadley, the US National Security Adviser, said: "We are not in a position at this point to publicly declare that he has been killed. If he has been killed, it’s a very good development." Asked whether the United States had helped to "take out" Rabia, Mr Hadley replied: "We’ve obviously been supporting Pakistan."

Parts of the missile casing have been retrieved, clearly bearing the words 'US' and 'Missile.'

In Washington, a senior US counter-terrorism official agreed that Rabia was responsible for international planning, including operations against the US. "He’s a senior member of al-Qaeda and this is a significant blow to them,’ he told the LA Times.

A senior al-Qaeda commander from Yemen, Haitham al-Yemeni, was killed in Pakistan in May 2005 by a missile fired by a CIA Predator. The CIA also allegedly used a Predator in November 2002 to blow up a vehicle carrying six Al Qaeda suspects in Yemen. Among those killed was Ali Qaed Sunian al-Harithi, believed to have planned the October 2000 bombing of the USS Cole.

Mr Hadley told CNN that finding Bin Laden and Zawahiri remained a priority. Asked whether they were still alive, he said: "At this point, we have no reason to think they aren’t."

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