ZAMBOANGA, The Philippines -- A senior leader of Al-Qaeda linked Muslim rebels, who kidnapped three Americans, was killed Friday during a high seas shootout with the Philippines military, AFP reported.

Military officials said the body of Abu Sabaya -- who had a five million dollar bounty on his head -- was fished out of the Sulu Sea along with those of two of his men after the dawn clash with an elite navy Special Warfare Group (SWAG) unit.

Marine Colonel Juancho Saban identified the other dead men as Abu Musa and Ibno Hajam.

Four other gunmen were arrested after the navy sunk their boat off the coastal town of Sibuco on Mindanao Island, the military added.

President Gloria Arroyo hailed the military "for their continuing determination and tenacity to finish off the Abu Sayyaf." Arroyo said she relayed the news to U.S. President George W. Bush in a telephone call and stressed that "He's happy that the Abu Sayyaf (problem) has been solved." She added that the operation to finish off the kidnap-for-ransom group would continue.

"Terrorists will be hunted down relentlessly wherever they are, in the fastness of the jungle or on the high seas. They will be given no room to maneuver, to hide or to rest. We will not stop until they are all accounted for." Defense Secretary Angelo Reyes said that U.S. technical surveillance had been key in pinpointing Sabaya's group and that the clash was "a planned operation," and not a chance encounter.

The death of Abu Sabaya -- born Aldam Tilao -- could prove a major blow to the Muslim rebels who have terrorized the Philippines and a swathe of the South China Sea since mid-2000 with their kidnap-for-ransom campaign.

The clash marked a fiery end for the 40 year-old Abu Sabaya, the highest-profile leader and spokesman of the gang, which has defied a manhunt by 5,000 Filipino troops, many of them trained by U.S. military advisors who arrived in January.

Officials said they recovered Sabaya's backpack, his signature dark glasses and the satellite phone he used make calls to local radio stations where he taunted the government and boasted of his killings.

Hours after the fatal clash, U.S. aircraft airdropped leaflets repeating offers of as much as five million dollars for information leading to the capture of other senior Abu Sayyaf leaders, said Major Richard Sater, spokesman for the U.S. military contingent in the south.

The fliers were dropped over the Abu Sayyaf strongholds of Jolo Island, the Zamboanga peninsula including Sibuco, and the Tawi-Tawi island group near the sea border with Malaysia.

Two weeks ago a military task force rescued U.S. hostage Gracia Burnham near Sibuco.

But her American husband and fellow Christian missionary, Martin Burnham, and a Filipina captive, Nurse Ediborah Yap, were slain in the fighting on June 7.

Regional military chief, Major General Ernesto Carolina said that troops had been tracking Sabaya's group since June 7 and had expected them to attempt to flee by sea.

The Burnhams were among a group of tourists captured from a Philippine resort in May 2001. The kidnappers along with about a dozen other captives later beheaded A third American tourist, Peru-born Guillermo Sobero.

The rebels were also allegedly behind a kidnapping on the Malaysian tourist island of Sipadan in April 2000, when a dozen foreigners were seized hostage and only returned after Libya reportedly paid huge ransoms.

Both Manila and Washington have linked the Abu Sayyaf to the Al-Qaeda terror network of Osama bin Laden, suspected mastermind of the September 11 attack in the United States.

Abu Sabaya's unit had fled to a forested area near Sibuco with the hostages after the military flushed them out of Basilan Island.

Major Sater hailed reports of Sabaya's death as "a step forward against terrorism." "The operation was well-planned, well executed. We feel we can celebrate with the (armed forces of the Philippines)," he added.

Sater said the U.S. forces in the area had provided surveillance and communication equipment to the Filipino troops involved in the firefight.

While Abu Sabaya's group was on the run, another suspected Abu Sayyaf faction based in Jolo is holding three Indonesian seamen seized from a tugboat earlier this week.

More than 1,000 U.S. troops are in the southern Philippines advising Filipino troops operating against the Abu Sayyaf, but they are barred from combat except in self-defense.