"We can see three dead bodies here," senior police officer Sanwar Hossain told AFP.
Bangladesh police shoot dead three 'Islamist' extremists near Dhaka
"Tamim Chowdhury is dead. He is the Gulshan attack mastermind and the leader of JMB (Jamayetul Mujahideen Bangladesh)," he said, referring to a Bangladeshi-Canadian citizen believed to be behind the attack on the cafe in Dhaka.
Police earlier staged an hour-long gun battle with extremists at Paikpara in Narayanganj, a city 25 kilometres (16 miles) south of Dhaka, Hossain said.
Bangladesh arrests five suspected extremists
Bangladesh national police chief A.K.M Shahidul Hoque told AFP police were "99 percent sure" that Tamim Chowdhury was in the hideout when police launched the assault.
Chowdhury, who returned from Canada in 2013, has been leading the banned JMB, which police say carried out the cafe attack in which 18 foreigners were shot and hacked to death in the country's worst terror attack.
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