The shoot-out Sunday in the eastern Rawdah district, an upscale neighborhood in the capital Riyadh, was the latest blow dealt to Osama bin Laden's group in Saudi Arabia, whose leaders have either been killed or captured since authorities launched an unrelenting offensive against it in 2003.

Moroccan Younis Mohammed Ibrahim al-Hayari was killed in a dawn raid by security forces in an area where suspected militants were hiding, an Interior Ministry official was quoted by Saudi Press Agency as saying. Three other suspects were arrested.

SPA, quoting an unidentified official, reported that al-Hayari headed al-Qaeda in the kingdom.

"He (al-Hayari) was nominated by his peers, and following the death of those preceding him, to be the head of sedition and corruption in the land," the official said in the SPA report.

Al-Hayari topped a list issued last week of 36 most-wanted militants sought for participation in previous terror attacks in the kingdom dating back to 2003. On Wednesday, Saudi Interior Minister Prince Nayef warned of the possibility of more attacks.

"Of course this Moroccan is on the list, the other three no, but they were known by the security apparatus," Nayef said in comments carried by the Saudi Press Agency.

"They killed the leader less than four days after they issued the list. That is a major victory, both on the intelligence and the logistical levels," said Mustafa Alani, a terrorism expert at the Dubai-based Gulf Research Center.

He claimed the terror group had a leadership crisis and that al-Hayari's killing will hurt the group's operations.

Al-Hayari was believed to have had close ties to Abdul Karim al-Majati, an al-Qaeda leader killed in April.

An Interior Ministry official who spoke with The Associated Press on the condition of anonymity because of the sensitivity of the issues, said security forces conducted two simultaneous operations in eastern Riyadh to capture suspects and killed al-Hayari after a shoot-out.

The official said the first operation ended with two suspects surrendering without incident. But in the second raid, militants fired at troops and lobbed grenades before al-

Hayari was killed and another extremist was arrested. The news report said six security forces members were slightly wounded in the gunbattles.

Faris bin Hizam, an expert on Saudi terror groups, said he wouldn't be surprised if more clashes erupt in the next few weeks. "Clearly the Interior Ministry has information about the militants," he said.

Analysts also have warned that Saudi fighters, battle-trained in Iraq, would be heading back to Saudi Arabia to regroup and continue the fight.

Washington-based counterterrorism expert Evan Kohlmann also expected an upsurge in the violence.

 "I think al-Qaeda in the kingdom may be going into a new period of activity. They were dormant for a long, long time, and suddenly they've become active. I don't think al-Hayari's death will end it," he said.

 Kohlmann said Iraqis were fed up with foreign fighters on their soil, and "it's only a matter of time before these guys start heading back. You're talking about thousands of their nationals who are across the border in Iraq."

 This oil-rich kingdom has suffered a series of heavy terrorist attacks since May 2003 when suicide bombers attacked three housing estates for foreigners in the capital Riyadh.

The kingdom then launched a wave of retaliatory raids against the militants, and issued a list of 26 most wanted in December 2003. Security forces have killed or captured 23 of the 26 figures on that list.

(Associated Press reporter Tarek al-Issawi contributed to this report from Dubai, United Arab Emirates.)