MEXICO CITY (REUTERS) - A Mexican drug lord who had been falsely reported dead more than three years ago was killed in a shootout with federal forces in western Mexico early on Sunday, the government said.

Nazario Moreno led a powerful criminal gang that has ravaged the western state of Michoacan, and was known as "El Mas Loco," or "The Craziest One."

He had been reported killed by the government in a firefight in December 2010, but his body was never recovered and he was widely believed to be still alive.

Government security spokesman Alejandro Rubido said Moreno was tracked down and found to be the undisputed leader of the main drug cartel operating in the area, The Knights Templar.

"This morning, he was intercepted," Rubido said.

"When he was asked to turn himself in, he opened fire and was killed."

The death of Moreno marks another major victory for President Enrique Peña Nieto's government in its campaign to bring Mexico's powerful drug gangs to heel.

The country's most wanted drug baron, Joaquin "Shorty" Guzman, was captured last month.

Officials said the identity of Moreno, who was killed by Tumbiscatio, a village about 50 km north of the port of Lazaro Cardenas, was confirmed via fingerprints.