Ibrahim Coulibaly died in a gun battle on Wednesday after he and his men refused to obey presidential orders to disarm.
The insurgents have been accused of not meeting a deadline to surrender arms and join the new army under Ouattara.
"I can confirm that Ibrahim Coulibaly was killed during fighting today," Captain Alla Kouakou Leon, a defence ministry spokesman, told Reuters news agency.
Ouattara had on Friday ordered Coulibaly and his forces to disarm or expect to have weapons seized by force. Coulibaly said that disarming would take time to organise.
Coulibaly's 'Invisible Commando' insurgents had fought alongside what is now the Ivorian national army to topple Gbagbo.
Last week Coulibaly pledged loyalty to Ouattara saying his 5,000 men were ready to join to new army. He requested a meeting with Ouattara but was told to disarm without condition.
It is believed that Coulibaly turned the gun on himself instead of surrendering to a group that he once considered an ally.
Fighting broke out on Wednesday night in the Abidjan neighbourhood of Abobo near the militia's headquarters as Ouattara's forces attacked the insurgents.
"Our positions were attacked this morning by Republican Forces (FRCI) while our soldiers had met to wait for disarmament overseen by the UN," Felix Anoble, a spokesman for Coulibaly, said.
Coulibaly had led a successful 1999 coup that installed General Robert Guei, who was assassinated after elections in 2000.
In 2002 Coulibaly helped lead a failed coup against Gbagbo and made no secret of his own presidential aspirations. Later that year, he began the rebellion that divided Ivory Coast between a rebel-held north and government-run south.