US president Barack Obama said bin Laden, the most-wanted fugitive on the US list, had been killed on Sunday in a US operation in the Pakistani city of Abbottabad, about 61km north of Islamabad.
"Tonight, I can report to the people of the United States and the world, the United States had carried an operation that has killed Osama bin Laden, a terrorist responsible for killing thousands of innocent people," Obama said in a statement.
"Today, at my direction, the United States carried out that operation... they killed Osama bin Laden and took custody of his body.
"The death of bin Laden marks the most significant achievement to date against al-Qaeda.
"We must also reaffirm that United states is not and will never be at war against Islam. Bin Laden was not a Muslim leader, in fact, he slaughtered many Muslims," Obama said.
Four people, including one of bin Laden's sons, were also killed in the operation.
According to New York Times, bin Laden's body was taken to Afghanistan and later buried at sea.
Hours after Obama made the announcement, a top al-Qaeda ideologue promised revenge for bin Laden's death. The commentator, going by the online name Assad al-Jihad2 posted on websites a long eulogy for the al-Qaeda leader and promised to "avenge the killing of the Sheik of Islam".
The Pakistani Taliban also threatened attacks against government leaders, including President Asif Ali Zardari, the Pakistan army and the United States.
"Now Pakistani rulers, President Zardari and the army will be our first targets. America will be our second target," Ehsanullah Ehsan, a spokesman for Tehrik-e-Taliban Pakistan (TTP), or Taliban Movement of Pakistan, told Reuters by telephone from an undisclosed location.
US celebrations
But as the news of bin Laden's death spread, crowds gathered outside the White House in Washington DC to celebrate.
Former US president George Bush called his death a "momentous achievement".
"The fight against terror goes on, but tonight America has sent an unmistakable message: No matter how long it takes, justice will be done," Bush said in a statement.
According to Al Jazeeera's Rosalind Jordan in Washington, the operation had been in the making for the last nine or 10 months.
"The fact that it happened inside Pakistan, there have been suggestions that Pakistani intelligence may have been protecting them," she said.
Patty Culhane, another Al Jazeera correspondent, said the US authorities got intelligence last September and were able to track bin Laden down through his couriers. They followed them to his compound which was reported to be worth over a million dollars.
Reporting from Pakistan, Al Jazeera's Kamal Hyder said the development had caught a lot of people by surprise .
"He was considered by many as a hero, but not to the extent that people would come out on the streets. The reaction so far not likely to be strong on the streets, perhaps a protest here or there by the religious parties," he said.
'Symbolic victory'
Qais Azimy, Al Jazeera's correspondent in Kabul, said Afghan officials described bin Laden's killing as a "symbolic victory", since he was no longer directly connected to the group's field operations.
"This organisation (Al Qaeda) is more than Bin Laden, it may be symbolised by Bin Laden, but it definitely is more than Bin Laden"
Mark Kimmit, US military analyst
Mark Kimmit, a US military analyst, said bin Laden's death "was not the end of terrorism, but an end of a chapter."
"Capturing or killing bin Laden has more iconic value. It will have symbolic value, because it has been a number of years since bin Laden has exercised day to day control over operations. We still have an al-Qaeda threat out there and that will be there for a number of years.
"This organisation (al-Qaeda) is more than bin Laden, it may be symbolised by bin Laden, but it definitely is more than bin Laden," he said.
It is, however, a major accomplishment for Obama and his national security team. Obama's predecessor, George Bush, had repeatedly vowed to bring to justice the mastermind of the September 11, 2001, attacks on New York and Washington, but never did before leaving office in early 2009.
He had been the subject of a search since he eluded US soldiers and Afghan militia forces in a large-scale assault on the Tora Bora mountains in 2001. The trail quickly went cold after he disappeared and many intelligence officials believed he had been hiding in Pakistan.
While in hiding, bin Laden had taunted the West and advocated his views in videotapes spirited from his hideaway.
Besides September 11, Washington has also linked bin Laden to a string of attacks - including the 1998 bombings of American embassies in Kenya and Tanzania and the 2000 bombing of the warship USS Cole in Yemen.
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