Brigadier-General Abdul Kareem Khalaf confirmed that the incident happened today to the north of Baghdad. He also told Iraqi state TV about the death.
There was no immediate confirmation from the US military, which was said not to have been involved in the killing.
Masri took over as the head of the terror network in Iraq in June last year after US forces killed the former leader in the country, Abu Musab al-Zarqawi.
Zarqawi died after an air strike on June 7th last year and his successor was announced on an Islamist website five days later.
Also known as Muhajir, Masri is thought to have been an Egyptian militant who trained in Afghanistan.
At the time of his anointment as leader, al-Qaida in Iraq released a statement referring to Masri as "a good brother, [with] a history in jihad [holy war] and… knowledgeable".
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