Amaq news agency, which Islamic State regularly uses to issue reports, disclosed this on Thursday.
The Pentagon said in March that Shishani had likely been killed in a U.S. air strike in Syria, but this was the first time the group appeared to confirm his death.
A report said that Islamic State supporters have been exchanging notes of praise and condolence on social media, including pictures of the ginger-bearded fighter, and pledged to launch a fresh offensive in his honor.
The officials at the Pentagon said they were aware of the report but could not confirm or deny it.
Meanwhile, Hisham al-Hashimi, a Baghdad-based security expert who advises the Iraqi government, said a source in Shirqat confirmed Shishani had been killed there along with several other militants.
But Rami Abdelrahman, Head of the British-based Syrian Observatory for Human Rights, said Shishani had been wounded in March and died soon after in the countryside east of Raqqa.
Abdelrahman, who tracked the war in Syria through a network of contacts, said that "I confirmed from the doctor who went to see him.
He said that the Islamic State likely delayed announcing his death to allow time to line up a successor.
Shishani, also known as Omar the Chechen, ranked among America’s most wanted militants under a U.S. program that offered up to 5 million dollars for information to help remove him from the battlefield.
A U.S. official said Shishani was born in 1986 in Georgia, then still part of the Soviet Union, he had a reputation as a close military adviser to Islamic State leader Abu Bakr al-Baghdadi, who was said by followers to have relied heavily on him.
He said Shishani once fought in military operations as a rebel in Chechnya before joining Georgia’s military in 2006 and fighting against Russian troops before being discharged two years later for medical reasons,.
The officials confirmed that he was arrested in 2010 for weapons possession and spent more than a year in jail, before leaving Georgia in 2012 for Istanbul and later Syria.
“He decided to join Islamic State the following year and pledged his allegiance to Baghdadi.
The State Department said Shishani was identified as Islamic State’s military commander in a video distributed by the group in 2014. (Reuters/NAN)