According to The Mirror, Lewthwaite had joined the Ukraine conflict just two weeks ago and was fighting on the side of a pro-government group, Aidar, as a sniper.
The Russian sniper who killed the British terrorist now has a bounty of $630,000 on his head from Ukrainian special services.
Muslim convert Lewthwaite, who was married to London 7/7 suicide bomber Germaine Lindsay, had been on the run ever since she was linked to a failed plot to blow up hotels and a shopping centre in Mombasa, Kenya, in 2011.
Interpol made her world's most wanted woman terrorist after her involvement in a Nairobi Mall attack that killed 67 people last September.
Reports last month had said that she had joined the Islamic State and was one of its most prominent female fighters.
Lewthwaite is the widow of Germaine Lindsay, one of four Islamist suicide bombers who attacked the London transport network on July 7, 2005, killing 52 people.
Computer files seized from her previous home in Mombasa by police have shown the mother of four wrote poetry praising Osama bin Laden, as well as showing a keen interest in dieting and fitness programmes.
Kenyan media have several times reported witnesses seeing a mystery white woman during a string of grenade attacks or killings at the Coast, but who apparently then vanishes without trace.
In June 2014, media speculated that a white woman had been allegedly offered a police escort in April to visit a Kenyan army base in Somalia before disappearing.
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