Osama bin Laden is said to have been seen at a fortified encampment south west of the Afghan city of Jalalabad.
He was spotted by informants in Tora Bora, three or four days ago.
They say bin Laden now travels only on horseback and at night, sleeping in caves and surrounded by up to 2,000 loyal guards.
The New York Timessays they are prepared to protect him to the death.
Hazarat Ali, the law and order minister of the Eastern Shura, a part of the Northern Alliance which claims control over three eastern provinces of Afghanistan, told the paper bin Laden had been seen in the middle of last week.
Tora Bora is at the meeting place of two valleys in the mountains of Nangarhar province, 35 miles south west of Jalalabad.
Mr Ali said bin Laden's al-Qaeda members had paid each family in the village £33 - more than five times the monthly wage - to leave Tora Bora.
The village, which is itself almost impregnable, is overlooked by a network of caves and fortified camps used by rebels who fought the Soviet Union when it invaded Afghanistan in the 1980s.
The minister's intelligence chief, Sohrab Qadri, says the Tora Bora camp can only be reached on horseback and includes bunkers and ammunition depots surrounded by deep forests. The caves are thought to be heated and ventilated.
The sighting is the first report of bin Laden's whereabouts since the beginning of the bombing campaign in October.