The Afghan Defense Ministry says it believes Mullah Brother was killed early Thursday in Helmand Province, a Taleban stronghold.
Ministry spokesman General Zahir Azimi says Afghan forces called in air support during heavy fighting before dawn Thursday.
He says Afghan commanders on the ground believe Mullah Brother and several of his men were killed during the fighting.
His death, if confirmed, would be a significant battlefield victory for U.S. and Afghan forces.
He was a top military commander when the Taleban controlled Afghanistan from 1996 to 2001. Since the Taleban was ousted in 2001, he has helped lead the insurgency against the NATO-backed government of President Hamid Karzai.
He is also said to be related by marriage to the Taleban's fugitive chief, Mullah Omar, who lost an eye when he was fighting in the guerrilla war against the invading Soviet military in the 1980s.
Mullah Brother would be the latest in a string of high-profile Taleban commanders either killed or captured in combat this year.
But the insurgency itself has not appeared to lose much ground. Military sources are already downplaying the broader significance of Thursday's action.
The Taleban still controls significant portions of southern and eastern Afghanistan, and bombings and shootings by the group and its supporters have made 2007 one of country's bloodiest in more than half a decade.
Speaking to reporters in Kabul Thursday, U.S. Major General Robert Cone said military force alone will not be enough to secure the country.
"The military will have a significant impact on the overall solution, but in reality, most insurgencies are dealt with by a political solution in the end," General Cone said.
Cone says individual military campaigns may be successful, but given "the complex nature of the environment," the insurgents can always come back "next year."
Afghan officials have repeatedly said they are open to political dialogue with Taleban insurgents.
But authorities say the group's leaders would be held accountable for any crimes they might have committed.
So far at least, there are few signs of political reconciliation, and no end in sight to Afghanistan's bloody insurgency.