Reports claim 30-year-old Abu Omar al-Shishani better known by the moniker 'Minister of War' has been killed.
Islamic State news agency, Amaq reported the chief military strategist, "died in combat" near the Iraqi city of Shirqat, 100km from the ISIS stronghold of Mosul.
Iraqi government forces say they have almost encircled Shirqat, as they drive their offensive northward into the heart of ISIS territory.
Al-Shishani who had a $5 million bounty on his head was said to have been killed by a U.S drone strike in March but Islamic State said he survived his injuries.
The red bearded fighter of Georgian-Chechen heritage is described as a capable commander by US intelligence sources and was reportedly consulted by ISIS leader Abu Bakr al-Baghdadi on key military movements, as the Islamist group expanded its reach.