Steven Tari, a convicted rapist, had been on the run since escaping from a prison in Madang in the Pacific nation's east during a mass break-out with 48 others in March this year.
Sylvester Kalaut, the Madang police chief, said on Friday that Tari and one of his followers were killed at a village about 20km outside Madang on Thursday as they were attacking a young woman.
"He is now dead and this could be the fate of the others who are also on the run from authorities and I am warning and strongly urging those escapees to surrender themselves to authorities," Kalaut told the PNG Post-Courier.
Tari, a failed Lutheran pastor who was widely known as Black Jesus, was found guilty in 2010 of raping girls who belonged to his Christian-based sect and sentenced to up to 10 years.
At the time, he had thousands of village followers, including a core of armed warriors to protect him, in what is commonly referred to in PNG as a "cargo cult".
As part of his "culture ministry", he preached that young girls were to be "married" to him as it was God's prophecy.
Kalaut said the woman Tari was in the process of attacking was "a flower girl tricked into joining the cult", adding that angry villagers had surrounded him and his companion and killed them.
His death follows that of a young high-school girl about a week ago, a murder alleged to have been carried out by Tari.
When he was captured in 2007, there were widespread allegations that his cult also practised cannibalism and sacrificial blood rituals, but police only charged him with rape.
PNG is a sprawling nation where black magic, sorcery and cannibalism sometimes occur.
Last year, police arrested dozens of people linked to an alleged cannibal cult accused of killing at least seven people, eating their brains raw and making soup from their penises.
THIS REMINDS ME OF BABI - BAHA'I HISTORY.