Al-Qaeda leader Osama bin Laden was killed in a US-led operation involving helicopters and ground forces in Pakistan on Sunday, ending a nearly 10-year worldwide hunt for the mastermind of the September 11 attacks.

US officials said bin Laden was found in a million-dollar compound in the upscale town of Abbottabad, 60km (35 miles) north of the Pakistani capital, Islamabad. A source familiar with the operation said bin Laden was shot in the head.

"Justice has been done," President Barack Obama declared in a hastily called, late-night White House speech announcing the death of the elusive head of the militant Islamic group behind a series of deadly bombings across the world.

Leaders worldwide praised the killing as a dramatic success in the war against Al-Qaeda, although many analysts cautioned it was too soon to say bin Laden's death would mark a turning point in the battle against a highly fractured network of militants.

Jubilant, flag-waving celebrations erupted in Washington and New York after Obama's announcement. It was the biggest national security victory for the president since he took office in early 2009 and could give him a political boost as he seeks re-election in 2012.

Obama may now also find it easier to wind down the nearly decade-old war in Afghanistan, begun after the September 11, 2001, attacks on New York and Washington that killed nearly 3,000.

But the operation could complicate relations with Pakistan, already frayed over US drone strikes in the west of the country and the jailing of a CIA contractor accused of killing two Pakistani men.

A US official said Pakistani authorities were told the details of the raid after it had taken place.

The revelation that bin Laden was living in style in a mansion will also put Pakistani officials under pressure to explain how he could have been right under their noses.

Residents in Abbottabad said a Pakistani military training academy is near the compound.

"For some time there will be a lot of tension between Washington and Islamabad because bin Laden seems to have been living here close to Islamabad," said Imtiaz Gul, a Pakistani security analyst.

US officials said American forces were led to the fortress-like three-story building in Abbottabad after more than four years tracking one of bin Laden's most trusted couriers, whom US officials said was identified by men captured after the September 11 attacks.

"Detainees also identified this man as one of the few Al-Qaeda couriers trusted by bin Laden. They indicated he might be living with or protected by bin Laden," a senior administration official said in a briefing for reporters in Washington.

Bin Laden was finally found after authorities discovered in August 2010 that the courier lived with his brother and their families in an unusual and extremely high-security building in Pakistan, officials said.

"When we saw the compound where the brothers lived, we were shocked by what we saw: an extraordinarily unique compound," a senior administration official said.

"The bottom line of our collection and our analysis was that we had high confidence that the compound harboured a high-value terrorist target. The experts who worked this issue for years assessed that there was a strong probability that the terrorist who was hiding there was Osama bin Laden," another administration official said.

Bin Laden and three adult men, including a son of bin Laden, were killed along with a woman who was used as a shield by a male combatant, officials said.

The New York Times said bin Laden's body was taken to Afghanistan and then buried at sea.

RESIDENT WOKEN BY BLASTS, GUNFIRE

The operation took under 40 minutes. A US helicopter was lost due to a mechanical problem and its crew and assault force safely evacuated, officials said. No Americans were harmed in the operation, Obama said.

"After midnight, a large number of commandos encircled the compound. Three helicopters were hovering overhead," said Nasir Khan, a resident of the town.

"All of a sudden there was firing towards the helicopters from the ground. There was intense firing and then I saw one of the helicopters crash," said Khan, who had watched the dramatic scene unfold from his rooftop.

Authorities said bin Laden's hideaway, built in 2005, was about eight times larger than other homes in the area. It had security features including 12- to 18-foot walls topped with barbed wire, internal walls for extra privacy, and access controlled through two security gates.

It had no telephone or Internet connection.

"It is not a surprise that bin Laden was captured in an urban heartland," said Sajjan Gohel of the Asia Pacific Foundation.

"Many of Al-Qaeda's senior leaders have been captured in Pakistani cities. It had become a myth that the Al-Qaeda leadership were hiding in caves in the tribal areas."

POSSIBLE REPRISALS

Bin Laden's death triggered a travel alert for Americans worldwide, the US State Department said, warning of the potential for anti-American violence.

Thousands of people gathered outside the White House, waving American flags, cheering and chanting "USA, USA, USA." Car drivers blew their horns in celebration and people streamed to Lafayette Park across from the street, as police vehicles with their lights flashing stood vigil.

"I'm down here to witness the history. My boyfriend is commissioning as a Marine next week. So I'm really proud of the troops," Laura Vogler, a junior at American University in Washington, said outside the White House.

Similar celebrations erupted at New York's Ground Zero, site of the World Trade Center twin towers felled by hijacked airplanes on September 11.

A market perception that the death of bin Laden reduced the security risks facing the United States lifted the dollar from a three-year low and raised stock index futures.

U.S. crude oil prices also fell. "Current oil prices are regarded by most analysts as carrying significant risk premium at current levels and good news on the geopolitical front has the potential to move prices back below $100," said Ric Spooner, chief analyst at CMC Markets in Sydney.

However, some analysts said the market impact would be short lived.

Many Americans had given up hope of finding bin Laden after he vanished in the mountains of Afghanistan in late 2001.

Intelligence that originated last August provided the clues that eventually led to bin Laden's trail, the president said. A U.S. official said Obama gave the final order to pursue the operation last Friday morning.

"The United States has conducted an operation that killed Osama bin Laden, the leader of Al-Qaeda and a terrorist who is responsible for the murder of thousands of men, women and children," Obama said.

CAPTURED DEAD

Former President George W. Bush, who vowed to bring bin Laden to justice "dead or alive" but never did, called the operation a "momentous achievement" after Obama called him with the news.

Martin Indyk, a former US assistant secretary of state for near eastern affairs, described bin Laden's death as "a body blow" to Al-Qaeda at a time when its ideology was already being undercut by the popular revolutions in the Arab world.

Other experts were more cautious. "It changes little in terms of on-the-ground realities -- by the time of his death bin Laden was not delivering operational or tactical orders to the numerous Al-Qaeda affiliates across the world," said Rick Nelson of the Center for Strategic and International Studies in Washington.