Sect leader Mohammed Yusuf escaped along with about 300 followers but his deputy was killed in Wednesday night's bombardment, according to Army commander Maj. Gen. Saleh Maina.
The army was conducting a house-to-house manhunt Thursday on the outskirts of Maiduguri for Yusuf and his followers.
An AP reporter watched soldiers shoot their way into the mosque in Maiduguri on Wednesday and then rake those holed up inside with gunfire. The reporter later counted about 50 bodies inside the building and another 50 in the courtyard outside. The militants were armed with homemade hunting rifles, bows and arrows and scimitars.
Another five corpses were just inside a large house near the mosque. Maina pointed to the body of a plump, bearded man and said it the Boko Haram sect's vice chairman, Bukar Shekau.
"The mission has been accomplished," said Maina, the army commander.
Militants seeking to impose Islamic Sharia law throughout this multi-religious country attacked police stations, churches, prisons and government buildings in a wave of violence that began Sunday in Borno state and quickly spread to three other states in mainly Muslim northern Nigeria.
It is not known how many scores of people have been killed, wounded and arrested. Relief official Apollus Jediel said about 1,000 people had abandoned their homes Wednesday due to the violence, joining 3,000 displaced earlier this week in the four states.
The epicenter of the violence has been the Boko Haram's headquarters in Maiduguri, capital of Borno state, which was bombarded Wednesday. Maina said his troops would fire mortar shells later Thursday to destroy what is left of the sprawling compound, which stretches over 2.5 miles.
Borno Gov. Ali Modu Sheriff told journalists he had a report that Yusuf had been seen Wednesday night in a village about 28 miles northeast of Maiduguri, and that he had asked for troops to be deployed there.
In other violence, Nigeria's Vanguard newspaper reported that militants attacked security forces in Yobe state on Wednesday, and quoted police as saying that 43 sect members were killed in a shootout near the state's second city, Potiskum.
Police in Bauchi state have reported 42 people killed, including two soldiers and a police officer, 67 hospitalized with serious injuries and 157 men arrested.
President Umaru Yar'Adua, who has been criticized for leaving the country Tuesday night for a state visit to Brazil, insisted before he left that the situation was under control. The military itself keep referring to "mopping up" exercises even as a full-scale battle was taking place.
Nigeria's 140 million people are nearly evenly divided between Christians, who predominate in the south, and primarily northern-based Muslims. Shariah was implemented in 12 northern states after Nigeria returned to civilian rule in 1999 following years of oppressive military regimes. More than 10,000 Nigerians have died in sectarian violence since then.
The militants oppose western education and seek a harsh interpretation of Islamic Shariah law in northern Nigeria.
Yet at the heart of the Islamic insurgency that sparked this week's violence is dire poverty and political maneuvering. The attacks on police have been committed by frustrated, unemployed youths and orchestrated by religious leaders and politicians who manipulate them to retain power.
Nigeria should be wealthy due to its prodigious oil reserves, but corruption and inefficiency have left many people in poverty.
The president said before his departure that security agents have been watching the sect for months and were ordered to attack when the movement began gathering fighters from nearby states at its Maiduguri headquarters.
He said they were preparing to unleash "the holy war."
Analysts say the recent trouble has brewed for months, as police began raiding militant hideouts and finding explosives and arms.
The radical sect is known by several different names, including Al-Sunna wal Jamma, or "Followers of Mohammed's Teachings" and "Boko Haram," which means "Western education is sin."
Some Nigerian officials have referred to the militants as Taliban, although the group has no known affiliation with Taliban fighters in Afghanistan.
But Boko Haram is reported to include many members of the elite, including university lecturers and others who have abandoned their posts and sold their homes to join. Vanguard and the Nigerian Guardian newspaper reported that police in northwest Sokoto state on Tuesday arrested former university lecturer Kadiru Atiku, believed to the sect's local leader.
Analysts say the latest violence reflects decades-old grievances of Nigerians whose governments are so corrupt and ineffective they do not deliver even basic services like running water and electricity.
Nnamdi K. Obasi, an analyst with the International Crisis Group, said the militants don't have the weapons or the numbers to have much impact beyond northern Nigeria but predicts violence will return unless deeper issues are addressed.
"You're talking about improving governance as a whole," Obasi said. "Reducing corruption. Year after year, you don't see progress on these issues, and this is one of the biggest problems of Nigeria."