Ishaq, who has been accused of masterminding dozens of attacks against the minority Shia community, his sons Usman and Haq Nawaz, and 11 other senior members of the group were killed in an encounter with police personnel late last night in Muzaffargarh district of Punjab province, police said.
At least six policemen were injured in the encounter which lasted for more than two hours, they said.
A top police officer said Ishaq, his sons and three other militants were taken to Shahwala in Muzaffargarh by Counter- Terrorism Department (CTD) for recovery of weapons and on their return they were attacked by LeJ militants.
"The militants were freed by the attackers who fled on motorbike," he said.
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However, an officer of CTD who was informed about the incident was travelling on the road taken by the fleeing militants. The officer challenged the militants, which led to heavy exchange of fire.
"In the clash, 14 militants were killed, including Ishaq and two sons, while three policemen were injured," he said.
Ishaq belonged to Rahimyar Khan district of Punjab and his death is a big blow to the LeJ which is involved in killing of hundreds of Shias.
The LeJ chief, one of the founders of the group set up in mid-1990s, was involved in several murder cases and was arrested in 1997. He was kept in jail for 14 years and released in 2011.
He was also believed to be the mastermind of 2009 attack on the Sri Lankan cricket team in Lahore.
The group had claimed responsibility for January 2013 blasts in the southwestern city of Quetta that killed over a hundred members of the Shia Hazara community.
In February 2013, LeJ claimed responsibility for another attack in the same neighbourhood that killed around 80 members from the Hazara community.