The officials say Gadahn, a native of Orange County, Calif., was seen in South Waziristan, where he is believed to be involved in the production of al Qaeda propaganda tapes.
He has appeared several times in the last year on video tapes, predicting the streets of America will "run red with blood" and expressing his glee that the 9/ll attacks took place on "enemy soil."
THE BLOTTER RECOMMENDS
U.S. law enforcement officials say Gadahn has taken an increasingly prominent role in the hierarchy of al Qaeda. He is believed to report to the No. 2 leader, Ayman al-Zawahiri.
Pakistani officials say they are "hot on the trail" of Gadahn, although South Waziristan is one of the areas where Pakistani soldiers have been ordered to stay in their barracks as part of a "peace agreement" between the Pakistani government and tribal militants believed to shelter al Qaeda and Taliban elements.
Gadahn was indicted earlier this month by a federal grand jury on charges of providing material support to terrorism.
U.S. law enforcement officials say if he is captured inside Pakistan, the indictment will serve as a legal mechanism to have him immediately turned over to U.S. custody.
Alexis Debat is an ABC News consultant.