Abdul Hasib, whose group is affiliated with IS in Iraq and Syria, was killed last month in a targeted raid by special forces in the eastern province of Nangarhar, the presidential palace in Kabul said in a statement.
The second leader of the jihadist group to be killed by US and Afghan forces in less than nine months, his death came days after Washington dropped its largest non-nuclear bomb on IS hideouts in the same area.
Analysts described him as "obscure", but authorities ascribed responsibility to him for assaults in Kabul, including the savage attack on a military hospital in March when assailants stabbed bedridden patients and threw grenades into crowded wards.
"He had ordered the attack" on the hospital, the presidential statement said, adding that Kabul will fight IS and other extremist groups "until they are annihilated".
NATO commander in Afghanistan General John Nicholson confirmed Hasib's killing and warned that "any ISIS member that comes to Afghanistan will meet the same fate".
"This is the second ISIS-K emir we have killed in nine months, along with dozens of their leaders and hundreds of their fighters," he added, using the acronym denoting the group's local affiliate, Islamic State Khorasan Province.
he first, Hafiz Saeed, was killed in a US airstrike also in Nangarhar province in July last year. Like Hasib, his death was seen as a setback, but not a mortal blow to the group.
NATO spokesman Captain Bill Salvin later elaborated on the raid, telling AFP: "There were women and children in the compound" where Hasib was killed.
"The assault force was able to safely separate the women and children from the combatants and there were no civilian casualties," he said.
Salvin added that "more than 500" IS fighters have been killed since an offensive began against them in March, though he could not immediately provide an estimate on how many remain.
Kabul-based analyst Ahmad Saeedi said the killing was unlikely to affect the group in a dramatic way because he would be quickly replaced.
"Dozens of Daesh fighters have been killed in eastern Afghanistan, but it did not bring positive change," he said, using the Arabic acronym for the group.