Colombia's president has hailed the killing by police of Pedro Guerrero, a notorious drug lord known as "The Knife" who had a $2.5 million American bounty on his head.

Authorities say the former paramilitary, known by his Spanish moniker "Cuchillo", was responsible for the death of some 3000 people, mostly when he led a unit with the right-wing United Self-Defence Forces of Colombia (AUC).

Dead ... the drug lord Pedro Guerrero, known as The Knife. Credit:AFP

Guerrero, 40, had a US bounty on his head for his role in smuggling illegal drugs into the United States.

"The assassin of assassins fell," said President Juan Manuel Santos, speaking to reporters at the headquarters of Colombia's national police in Bogota. "We have been after him for many years."