A senior Somali government source told Reuters the fugitive had been in a car with other senior Islamist insurgents when they were attacked near Roobow village in Barawe District, 250 km south of the capital Mogadishu.
"Nabhan and four other top foreign commanders of militant groups were killed in the raid," the source said.
"These young fighters do not have the same skills as their colleagues in Afghanistan or elsewhere when it comes to foreign airstrikes," the government source added. "They are in confusion now. I hope the world takes action."
A local man at the scene said foreign commandos who carried out the raid were wearing French flags on the shoulders of their uniforms. The spokesman for the French Defence Ministry, Christophe Prazuck, denied any French soldiers were involved. "We don’t have any military presence in that region … there are no forces in that territory," Prazuck said in Paris.
Western security agencies say the failed Horn of Africa state has become a safe haven for militants, including foreign jihadists, who use it to plot attacks in the region and beyond.
Nabhan is believed to have owned the truck used for the 2002 bombing of an Israeli-owned hotel on Kenya’s coast that killed 15 people. He is thought to have fled to Somalia afterwards. Several residents in Barawe said Nabhan had been killed in the attack, but declined to be named for fear of reprisals.
French forces have launched commando raids in Somalia in the past to rescue French nationals held by rebels and pirates.