The assault began early Tuesday after the failure of negotiations to persuade Abdul Rashid Ghazi, brother of the mosque's chief cleric who was captured last week, and about 1,000 radical religious students to surrender.
"He was found in a cellar. He had been offered surrender, he refused and was killed," Kamal Shakh said.
Hard-line religious students have been barricaded in the Lal Masjid mosque, a hotbed of Islamic radicalism in the Pakistani capital, since shootouts with security forces last Tuesday. The rebels advocate strict Islamic values and want to impose Taliban-style rule in the capital.
At least 60 militants were killed and as many captured Tuesday when troops stormed Lal Masjid. At least four soldiers were reported killed in the operation. About 27 children and 20 women managed to flee the compound, Pakistani Army spokesman Gen. Waheed Arshad said earlier in the day.
Fighting in the sprawling complex is continuing, with government troops focusing on a women's religious school where the remaining militants are believed to have holed up.
The militants are believed to be holding about 150 hostages inside, among them female students and children, although they had previously insisted that all those remaining in the mosque were there voluntarily and preferred martyrdom to surrender.