Alleged drug cartel leader Ezequiel Cardenas Guillen was killed in a shootout in the border city of Matamoros, a Mexican official said.
Federal security spokesman Alejandro Poire said Cardenas Guillen was killed in a clash with marines.
Mr Poire said three gunmen and two marines were also killed.
Cardenas Guillen was allegedly a leader of the powerful Gulf Cartel.
He was indicted in the United States on drug trafficking charges and US authorities offered a $5 million reward for information leading to his arrest.
Cardenas Guillen, also known as Tony Tormenta or Tony the Storm, was killed along with four of his gunmen and three marines in the city of Matamoros, across from Brownsville, Texas, the Mexican navy said in a statement.
A soldier and a local reporter were also killed in related mayhem that began yesterday morning and lasted into the evening.
Across the city, residents holed up in their homes and offices to escape the violence, communicating by Facebook and Twitter.
"Shelter, everyone! Don't leave your houses please. Pass the word," read one tweet.
Cardenas Guillen, 48, is believed to have run the powerful cartel along with Jorge Eduardo Costilla Sanchez, moving cocaine and marijuana into the United States.