"Majid al-Majid, who suffered from kidney disease and was in poor health, has died," the source told AFP on condition of anonymity.
Majid was the suspected head of the Abdullah Azzam Brigades, which claimed responsibility for an attack in November on the Iranian embassy in Beirut that killed 25 people.
A Lebanese minister this week told AFP that Majid had been arrested by army intelligence.
Saudi Arabia had hailed Majid's detention, and the Iranian embassy in Beirut had requested access to the investigation into the double suicide bombing.
Hezbollah and Iran are allied with the Syrian regime, and Hezbollah has sent fighters to help battle the Sunni-led insurgency, which is supported by its opponents in Lebanon.
In claiming the embassy bombing, brigades member Sirajeddin Zreikat warned of more attacks in Lebanon if Hezbollah keeps sending troops to support Syrian President Bashar al-Assad.
In 2009, Lebanon sentenced Majid in absentia to life in prison for belonging to a different extremist group, the Al-Qaeda-inspired Fatah al-Islam.
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