(Updates with Australia declares Islamic State terrorist group, adds comment)
SYDNEY, May 5 (Reuters) - An Australian citizen believed to be a top recruiter for the Islamic State has been killed in a U.S. air strike in Iraq, disrupting the militant group's ability to lure fighters, Australia said on Thursday.
Australia also formally declared Islamic State a terrorist organisation, meaning that dual citizens could have their Australian citizenship revoked if found to be a member of the militant group.
Attorney-General George Brandis said the United States had advised him that Australian Neil Prakash, who was linked to several Australia-based attack plans and calls for lone-wolf attacks against the United States, was killed in an air strike in Mosul on April 29.
Melbourne-born Prakash had appeared in Islamic State videos and magazines and had actively recruited Australian men, women and children, and encouraged acts of terrorism, Brandis said.
"Neil Prakash's death is a very, very positive development in the war against Daesh and the war against terror," Prime Minister Malcolm Turnbull told Sky News, referring to Islamic State.
Australia last year announced financial sanctions against Prakash, including threatening anyone giving financial assistance to him, with punishment of up to 10 years in jail.
Australia is on alert for attacks by radicalised Muslims, including home-grown militants returning from fighting in the Middle East. who is believed to have relocated to Syria in 2014, joined two other Australian Islamic State fighters on a U.N. sanctions list, Mohamed Elomar and Khaled Sharrouf, who appeared in images last year holding the severed heads of Syrian soldiers.
Declaring Islamic State a terrorist group, the first to be designated such under Australia's new Allegiance to Australia Act, Immigration Minister Peter Dutton said it was "both engaging in acts of terrorism and is opposed to Australia and its interests".
Brandis said he had also been advised by the U.S. government that a second Australian citizen involved in the radical Sunni group, Shadi Jabar Khalil Mohammad, was killed on April 22 in a U.S. air strike near Al Bab in Syria.
Mohammad and her Sudanese husband, Abu Sa'ad al-Sudani, were active recruiters of foreign fighters on behalf of Islamic State and had been inspiring attacks against Western interests, Brandis said.
Mohammad was also the sister of Farhad Mohammad, the 15-year-old boy who shot dead police accountant Curtis Cheng at a police headquarters in the Sydney suburb of Parramatta in October. Farhad Mohammad was killed in a gunfight with police outside the building.