Al-Badawi was arrested by Yemeni authorities in December 2000 in connection with the attack but escaped from a prison in April 2003.
The FBI had listed Badawi among its most wanted terrorists since 2006, promising a $5 million bounty for information leading to his capture or death. This led the State Department to voice some misgivings about war-torn Yemen's ability to hold al-Qaeda prisoners.
A US official, who spoke on condition of anonymity, told CNN on Friday that Al-Badawi was struck while driving alone in a vehicle.
US forces conducted a precision airstrike targeting al-Badawi on January 1 in the Marib governorate, said Capt. Bill Urban, a Central Command spokesperson.
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One of the masterminds behind a deadly attack on a US warship in Yemen more than 18 years ago was killed in that country earlier this week, according to a report published Friday. The US says there was no collateral damage.
Seventeen American sailors were killed as well as the two perpetrators of the attack that was claimed by Al-Qaeda, in an early success for the terror group and its founder Osama Bin Laden.
He was reportedly among those who orchestrated the attack on USS Cole in Yemen on October 12, 2000, which killed 17 people and wounded a further 39.
Al-Badawi was charged with 50 counts of various terrorism offenses, including murder of US nationals and murder of USA military personnel. He was recaptured in March 2004 and sentenced to death, but almost two years later he managed to escape a second time. Other sources, however, said Al-Badawi was believed to have been killed.