Abdullah Ahmed Abdullah, who was on the FBI's list of most wanted terrorists, was shot and killed in Tehran by two Israeli operatives on a motorcycle at the behest of the United States, the newspaper said, citing confirmation from unnamed intelligence officials.
Al-Masri was featured on the FBI's "Most Wanted Terrorist" list, and had been indicted in the U.S. for crimes related to the bombings of the USA embassies in Kenya and Tanzania, in which 224 people were killed and hundreds wounded.
Abdullah Ahmed Abdullah, who went by the nom de guerre Abu Muhammad al-Masri, was gunned down on the streets of Tehran by two assassins on a motorcycle on August 7, the anniversary of the embassy attacks.
The bombings of the U.S. embassies in Kenya and Tanzania in 1998 left 224 people dead and more than 5,000 injured.
On August 7, he was driving a white Renault L90 sedan with his daughter near his home when two gunmen on a motorbike shot five times at them with a pistol fitted with a silencer, it said.
It was not immediately known what, if any, impact al-Masri's death has had on Al Qaeda's activities.
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He had been in Iran since 2003, initially under house arrest but later living freely, American intelligence officials quoted in the New York Times said. In 2018, Iran's Foreign Ministry spokesman Bahram Ghasemi had said that some al-Qaeda members had entered Iran because of Iran's long and porous border with Afghanistan.
On Saturday, however, Iran responded to the report by saying it was based on "made-up information" and denied the presence of any al-Qaida members in the country.
An US official, speaking to Reuters on the condition of anonymity, refused to confirm any of the details in The New York Times article or whether Washington was involved.
In 2011, the Al Qaeda chief who orchestrated the 9/11 attacks, was killed in a United States raid in Pakistan.
Shi'ite Iran and al Qaeda, a Sunni Muslim militant organization, have always been enemies.
USA authorities had been tracking Masri and other al Qaeda operatives in Iran for years, it said. Even as it has lost senior leaders in the almost two decades since the attacks on NY and Washington, it has maintained active affiliates from the Middle East to Afghanistan to West Africa.