Faruqi was among the top 20 most-wanted terrorist suspects in Pakistan.
President Pervez Musharraf today praised his security forces for killing Faruqi: "We've killed, we've eliminated, one of the very major sources of terrorist threat. Not only was he involved in attacks on me, but also in attacks elsewhere and terrorist attacks elsewhere in the country. So a very big terrorist has been eliminated."
Faruqi was the alleged mastermind of a failed assassination attempt against Musharraf on 25 December 2003.
Musharraf spoke out against his assailants the next day: "Certainly, they are the enemies of Pakistan. They are against whatever good we want to do for this nation. Whatever progress, prosperity that we want to bring about to this nation, these people are enemies of that. They want to pull us back and they want to keep us in a backward state."
Faruqi also allegedly had been involved in the 2002 murder of "The Wall Street Journal" reporter Daniel Pearl, as well as a suicide bombing on the U.S. consulate in Karachi that same year.
A Pakistani intelligence official told Reuters that Faruqi refused to surrender yesterday when he was confronted in the southern town of Nawabshah.
A regional government spokesman described the clash as a "significant operation" in which paramilitary rangers raided a house after receiving information about Faruqi's location.
Pakistani television has broadcast video footage of the operation that shows rangers and police surrounding the house. Witnesses say authorities were fired upon when they urged Faruqi and other militants to surrender.
The witnesses say tear gas was then used to force Faruqi and other occupants out. Security officials say they fired on Faruqi because they thought he had explosives strapped to his body.
Two other men were arrested in the raid, including one foreigner whose identity was not immediately available. Two women and two children also were taken into custody.
Despite Islamabad's claims of success, not all terrorism experts are convinced that Faruqi's death is a major setback to Al-Qaeda operations in Pakistan.
One of them is Rahul Bedi, a New Delhi journalist who covers terrorism issues in India and Pakistan for the London-based journal "Jane's Defense Weekly:"
"It is not particularly significant, because the Al-Qaeda leadership is now dissipated," Bedi said. "It's fragmented. So killing one leader, or killing even several other leaders, is not really going to affect the operational capabilities of Al-Qaeda in any significant way. It is a setback [for Al-Qaeda because] it is a morale setback. But by itself, it doesn't really represent a depreciation of Al-Qaeda's capabilities."
Faruqi belonged to an Al-Qaeda linked militant Islamic group called Harkat-ul Jihad-e Islami -- or the Movement of Islam's Holy War.
Residents of Faruqi's home village in Punjab Province say he had recruited about 200 Pakistanis to fight against U.S. forces in Afghanistan in late 2001. Those villagers also say Faruqi had joined Islamic militants as early as 1988 to fight against Indian rule in Kashmir.
India has repeatedly accused Pakistan's government of supporting cross-border terrorism in order to foment a separatist rebellion in Indian-administered Kashmir. Islamabad has said it supports the objectives of militants' in Kashmir but does not give them any material support.
Pakistani intelligence officials also say Faruqi once served as a bodyguard to Maulana Masood Azhar -- a militant that New Delhi has linked to a suicide attack on the Indian Parliament in December 2001. The Indian government did not issued any immediate statement in reaction to Faruqi's death.
Although Faruqi was known to be influential within the Al-Qaeda network, Rahul Bedi said his death will have only a minor impact on the global war on terror.
"He, according to the reports, has been operating in Pakistan over the last two or three years and has been hiding like several other Al-Qaeda leaders. He was one of the fairly senior leaders of Al-Qaeda who was responsible for some of the dangerous cells. His killing is a part of Pakistan's continuing campaign against Al-Qaeda. But in the total mosaic of the campaign against terror, he is one small cog in that entire wheel."
Meanwhile, there are signs that Pakistani authorities have gained additional information about Al-Qaeda operatives as a result of yesterday's raid.
Pakistani security forces today stormed another house in the same region and arrested three terrorism suspects. An earlier raid also had been conducted by police and paramilitary troops in the town of Sukkur in southern Sindh Province.
Musharraf said much useful information about suspected terrorists has been gathered as a result of the recent raids. He said the information will lead to what he called "further arrests and eliminations."