In swift retaliation shortly after discovering Johnson's body Friday, Saudi police swooped down on the al-Malz neighborhood in central Riyadh and exchanged fire with al Qaeda suspects. Abdulaziz al-Moqrin, the reputed leader of al Qaeda in the kingdom, was killed along with two other militants, Saudi officials said.
They said one security officer was killed and two were wounded.
A U.S. official, who spoke on condition of anonymity, confirmed al-Moqrin's killing. A Saudi official said forensic tests would be conducted on the body to confirm his identity. A security official in Riyadh said Rakan Mohsen Mohammed Al Saykhan, the second most-wanted Saudi militant, was wounded in the clash and arrested.
The killing of al-Moqrin, 31, would be a coup for the Saudi government, which has been under intense pressure to halt a wave of attacks against Westerners in the kingdom. In a video posted on the Internet Tuesday, a hooded al-Moqrin held an assault rifle and shouted demands for the release of al Qaeda prisoners as a blindfolded Johnson sat in a chair.
Saudi security officials said a second operation aimed at al Qaeda supporters or suspects was under way in the al-Quds neighborhood. The Saudi-owned Al-Arabiya satellite station later reported that operation had ended, but provided no details.
A Saudi security official said a witness took note of the license number of a car from which Johnson's body had been dumped and told police. Police stopped the car at a gas station and the shootout ensued.
The executioners' photographs and statement, in the name of the Fallujah Brigade of al Qaeda in the Arabian Peninsula, appeared on a Web site hours after Johnson's wife went on Arab television and tearfully pleaded for his release.
Johnson's body was later found just outside the capital, Riyadh, Saudi security officials said.
Johnson, who had worked in Saudi Arabia for more than a decade, was the latest victim of an escalating campaign of violence against Westerners that aims to drive foreign workers from the kingdom and undermine the ruling royal family, hated by al Qaeda. Osama bin Laden, al Qaeda's leader, is a Saudi exile.
"In answer to what we promised ... to kill the hostage Paul Marshall (Johnson) after the period is over ... the infidel got his fair treatment," the al Qaeda statement said. "Let him taste something of what Muslims have long tasted from Apache helicopter fire and missiles."
CBS News Correspondent Sheila MacVicar reports that for Americans living in Saudi Arabia, the murder of Paul Johnson may make some re consider their decision to stay in the country.
"I think they're going to be rattled and very frightened about what happened,'' said one American, who asked not to be identified. "The manner in which he died is extremely horrific and shocking.
Johnson, 49, who worked on Apache attack helicopter systems for the American defense company Lockheed Martin, was kidnapped last weekend by militants who threatened to kill him by Friday if the kingdom did not release its al Qaeda prisoners. The Saudi government rejected the demands.
U.S. President George W. Bush condemned the beheading and vowed that "America will not be intimidated by these kinds of extremist thugs."
U.S. Vice President Dick Cheney also condemned the killers. "They have no shame, not a shred of decency, and no mercy. America will hunt down the killers, one by one, and destroy them."
One of the three photographs posted on the Web site showed a man's head, face toward the camera, being held by a hand. The two others showed a beheaded body lying prone on a bed, with the severed head placed in the small of his back, the clothes underneath bloodied. One showed a bloody knife resting on the face.
The beheaded body was dressed in a bright orange jumpsuit, similar to one Johnson is seen wearing in earlier videos released by the kidnappers.
"To the Americans and whoever is their ally in the infidel and criminal world and their allies in the war against Islam, this action is punishment to them and a lesson for them to know that whoever steps foot in our country, this decisive action will be his fate," the al Qaeda statement said.
There are 35,000 Americans among the millions of Westerners who work in Saudi Arabia.
Soon after the statement appeared, a number of Web sites that had links to it became inaccessible, with messages saying they were closed for maintenance.
Johnson's beheading is the latest in a new, more dramatic wave of terror attacks for Saudi Arabia: bodies dragged on streets, traffic police blown up in their offices, hotel guests taken hostage and a chef shot outside an ATM machine. The attacks have killed dozens of people, mostly foreigners, over the past two months.
The violence is escalating despite an aggressive campaign by the government to root out terrorism, leaving many wondering whether the attacks are just the beginning or — as the government continues to insist — the last gasps of a desperate group reacting to the pressure of the hunt.
Johnson was seized on June 12, the same day that Islamic militants shot and killed American Kenneth Scroggs in his garage in Riyadh.
Scroggs worked for Advanced Electronics Co., a Saudi firm whose Web site lists Lockheed Martin among its customers. The office number on Johnson's business card was for Advanced Electronics.
The same week as Scroggs' death, militants shot and killed another American, Robert Jacobs, and Irish citizen Simon Cumbers in Riyadh.
A video released by the same militants showed attackers bent over Jacobs body, making a sawing motion near the head. But there was no confirmation that he had been decapitated.
Earlier, as the deadline approached, Saudi security forces and the FBI launched an all-out search, going door-to-door in some Riyadh neighborhoods, and Johnson's Thai wife, Thanom, made an appearance on Al-Arabiya.
"When I see his picture in TV, I fall down," Thanom said, fighting back tears. "When I hear the name Paul Johnson, I cry a lot."
Back in the United States,
An unidentified woman stood outside the house, weeping. A man outside the house who identified himself only as Bill said the family did not want to talk to reporters.
Former Deputy Minister of Interior Ibrahim Alebaji acknowledged the shortcomings of Saudi security forces.
"Our security apparatus is not well trained in combating terrorism, but they are learning," Alebaji said on Saudi television. He added that the Interior Ministry could not defeat terrorism without greater cooperation from the people.
CBS News Correspondent Dan Raviv reports that until a few years ago, Saudi Arabia was a tightly-controlled country. The royal family -- the House of Sa'ud -- seemed to be closely connected with the most influential religious leaders.
But since Sept. 11, then with anger at America for invading Iraq, radical Islam seems to have gained strength in Saudi Arabia. A symptom is this upsurge in violence, Raviv reports.