Troops killed Faizal Abbas, alias Isnani, after a gun battle on Serantes street in downtown Jolo about 6 p.m. on Monday, said Lt. Gen. Roy Kyamko, Armed Forces Southern Command chief.
An unidentified companion of Abbas was wounded, but escaped, Kyamko added.
Kyamko said Abbas resisted and shot it out with Army intelligence agents under Capt. Ely Tono, who tried to arrest him.
"Faisal Abbas is a Basilan-based Abu Sayyaf leader who was one of the Sipadan hostage-takers, and was also responsible in the abduction of three French journalists three years ago," he said.
The shootout lasted for five minutes, and troops recovered an Armalite rifle from Abbas, he added.
Kyamko said Abbas has a standing warrant of arrest for kidnapping and serious illegal detention issued by Judge Danilo Bucoy of the Basilan regional trial court.
Troops have intensified the hunt for the other Abu Sayyaf commanders who took part in the kidnapping, he added.
Among those who remain at large are Ghalib Andang alias Commander Robot, Umbra Jumdail alias Dr. Abu Pula, and Radulan Sahiron, alias Commander Putol.
Andang was also implicated in the recent kidnapping of six tourists in Lahad Datu, Sabah.
The victims who are believed to be still alive are Indonesians Anuar Yancong, 27, Arsyad Sagoni, 43, Suwito Tujimon, Amir Nanggi, 43; and Filipino Badjao Azarah Saraban, 35.
Reports said they are being held in an island in Tawi-Tawi as troops have failed to locate their remains.
The military said Abbas was part of an Abu Sayyaf band that raided a resort in Sipadan island off Sabah in April, 2000, seizing 21 European, Malaysian and Filipino hostages.
The hostages were released in batches over several months allegedly in exchange for huge ransoms.
Abbas is also believed responsible for kidnapping several French journalists who later came to Jolo to cover the Sipadan kidnapping.
The journalists were themselves later ransomed off. — With AFP report