Security forces confirmed that the head was found in a freezer during the raid on an apartment, John MacDonald, Gulf correspondent for Global Radio News, told CBS Radio News. The rest of the body was not found.
The U.S. Embassy in Riyadh issued a statement saying the Saudi authorities had informed it that they had found "what they believe to be the head of Paul Johnson."
The statement said the consular section was in the process of notifying Johnson's family in order to identify the head.
Johnson, a 49-year-old engineer who had worked in Saudi Arabia for more than a decade, was kidnapped June 12 by militants in Riyadh who followed through on a threat to kill him if the kingdom did not release its al Qaeda prisoners. An al Qaeda group claiming responsibility posted an Internet message that showed grisly photographs of a beheaded body on June 17. Later, video of the beheading was posted.
Hours after the pictures of the beheading appeared on the internet,, alleged mastermind of Johnson's kidnapping and beheading.
Last week, U.S. authorities announced the search for Johnson's body had been called off.
Johnson's son in Florida, Paul Johnson III, 28, had been pressing U.S. officials to do more to find his father's body. He was to meet Wednesday with Sen. Bill Nelson, D-Fla., in Washington. That meeting was canceled after news of the grisly discovered was announced.
Johnson was an engineer for Lockheed Martin who worked on Apache helicopters. He grew up in Eagleswood Township, New Jersey.
The Saudi Interior Ministry said Johnson's head was found after a search of one of three locations following the late Tuesday raid. Weapons, including an anti-aircraft SAM-7 missile, chemicals, video cameras and cash were among items seized from the location.
Earlier, an Interior Ministry official said authorities were holding the wife and three children of Saleh Mohammed al-Aoofi, the man believed to be al-Moqrin's successor, after the raid in which two militants were killed and three others wounded.
One of the dead militants, identified by the Interior Ministry as Issa Saad Mohammed bin Oushan, is on the Saudi government's list of wanted militants. The statement did not name the wounded.
Pan-Arab news station have reported that al-Aoofi may be among the casualties.
The Saudi Interior Ministry official, quoted by the official Saudi Press Agency, said three members of the security forces were wounded in the gunbattle which erupted when security forces came under "heavy fire" from hand and rocket-propelled grenades while inspecting a residence suspected of being used by militants.
Another group of militants fired on policemen engaging the first group of militants in an attempt to distract members of the security forces, the Interior Ministry official said. Authorities are still pursuing those gunmen.
The shootout was the most serious since Saudi forces shot dead al-Moqrin.
King Fahd last monthif they turned themselves in before Friday. He said he wouldn't seek the death penalty for those who surrendered.
Four militants have come forward, and security forces have stepped up efforts to capture the rest.
During the past year, Saudi Arabia has been rocked by suicide bombings, gunbattles and kidnappings targeting foreign workers. The attacks have been blamed on al Qaeda and sympathizers of the anti-Western terror network headed by Saudi dissident Osama bin Laden. Al Qaeda wants to topple the Saudi royal family and replace it with its own Islamic government.