Mexico's defence ministry said a shootout in the western state of Jalisco left Oseguera seriously injured and he died during an air transfer to Mexico City on Sunday.
The ministry noted that US authorities had provided "complementary information".
The operation set off a wave of violence, with torched cars and gunmen blocking highways in more than half a dozen states.
An ex-police officer, Oseguera was the shadowy leader of the powerful Jalisco New Generation Cartel (CJNG), an outfit named for the western state that is home to one of Mexico's biggest cities, Guadalajara.
Over a relatively short period of time, the CJNG morphed into an international criminal enterprise rivalling former allies in the Sinaloa Cartel, the gang of captured kingpin Joaquin 'El Chapo' Guzman, now in a US prison.
The military operation against Oseguera follows a pressure campaign from the Trump administration on Mexican President Claudia Sheinbaum's government to ramp up its crackdown on drug trafficking, including US threats to intervene directly in Mexico.
"The operation for his arrest was led by the defence ministry, and he ended up being killed," a government source familiar with the operation told Reuters.
US Deputy Secretary of State Christopher Landau said Oseguera's killing was a "great development" for the US and Mexico, as well as the rest of Latin America.
The kingpin's killing notches a major victory for Mexico's war on drug cartels that are responsible for smuggling billions of dollars in cocaine and fentanyl into the US. It is also expected to unleash a wave of violence across Mexico.
"A tremendous amount of violence is going to happen," said Vanda Felbab-Brown, an expert on international organised crime.
She compared Oseguera to other key drug figures taken down in recent years, Guzman and Ismael "El Mayo" Zambada, both of the rival Sinaloa cartel.
"Apart from the heads of the Sinaloa cartel, El Mencho has been the biggest prize for many, many years."
Jalisco Governor Pablo Lemus Navarro urged residents to stay home until the situation was brought under control, and the US embassy advised its citizens to shelter in place.
Videos on social media showed cars ablaze, sending dark smoke into the sky, on roads in Jalisco. Mexican media outlets reported burning vehicles and gunmen blocking highways in more than half a dozen states across the country, particularly in the north and west.
Air Canada said on Sunday it temporarily suspended operations in Jalisco's Puerto Vallarta on the Pacific coast, a popular beach resort for Canadians and Americans.
United Airlines and American Airlines said they have cancelled flight operations to Puerto Vallarta and Guadalajara.
American Airlines told Reuters in a separate statement it has cancelled flights to and from PVR and GDL for the remainder of Sunday.
