At least 14 militants were killed and six others captured in the three days of fierce firefights in the desert town of al-Rass, state-run television said, citing security officials after the battle was over.
For nearly 48 hours, up to 10 gunmen had been holed up in the villa compound with a large arsenal of weapons, surrounded by hundreds of Saudi special forces and firing off heavy volleys of automatic weapons fire and grenades.
In a statement read out on Saudi television, Saudi Crown Prince Abdullah congratulated security forces, who "demonstrated their courage in facing up to terror acts. We thank each one of them for their heroic deeds."
Earlier, officials said 35 police were wounded in the fighting, which began Sunday in ar-Rass, a known stronghold of Islamic fundamentalists, 220 miles northwest of Riyadh.
The death toll is the highest since the kingdom's "war on terror" began in May 2003 when suicide bombers attacked three compounds for foreign residents in the Saudi capital, Riyadh. Police arrested hundreds of suspects in the subsequent crackdown.
A senior military official in ar-Rass, speaking on condition of anonymity, saud that among those killed were Moroccan Kareem Altohami al-Mojati and Saudi Saud Homood Obaid al-Otaibi, who were ranked as four and seven respectively on Saudi Arabia's list of 26 most-wanted al Qaeda-linked terror suspects, issued in December 2003.
Interior Ministry spokesman Brig. Mansour al-Turki could not confirm that the two wanted militants were among those killed.
Arab TV stations, including Saudi-owned Al-Arabiya and Qatar-based Al-Jazeera, cited security sources as saying al-Mojati and al-Otaibi had been killed.
Previously, the highest number of militants killed in a single battle with Saudi forces was six in July 2003, when police raided a farm in al-Qassim, 220 miles northwest of Riyadh. Al Qaeda-allied terrorists have claimed responsibility for numerous suicide bombings, gunbattles and bomb attacks targeting Saudi security forces and Western interests in the oil-rich Gulf kingdom.
The battle began Sunday morning when security forces, acting on a tip, arrived at another building in Jawazat. Militants opened fire with automatic rifles and grenades, sparking a clash with police that killed three suspected terrorists. The remainder fled to the villa. The seven other militants were killed in subsequent shootouts.
Saudi newspapers have carried profiles of the two wanted militants. Al-Mojati, the Moroccan, is a battle-hardened fighter who had fought in Afghanistan and is described as a supporter of al Qaeda leader Osama bin Laden.
The papers claimed al-Mojati had helped plan the May 2003 suicide bombings in Casablanca that killed 33 bystanders and 12 suicide bombers.
Al-Otaibi is said to be one of two Saudi militants running al Qaeda's branch in Saudi Arabia. Last year, he purportedly posted an Internet statement rejecting an amnesty offered by Saudi ruler King Fahd, who promised militants their lives would be spared if they surrendered.