Foreign Minister Julie Bishop confirmed there had been recent drone strikes in the area but said she was still awaiting "absolute verification" they were dead.
Elomar’s body had been recovered while the remains of Sharrouf were missing, according to the same sources.
Sharrouf's seven-year-old son is also pictured holding a severed head.
"You can't really spin them as great warriors, they were yobos goofing off indulging childish fantasies in a most reckless and evil kind of fashion", says terror specialist Professor Greg Barton.
Ms Bishop said that Sharrouf's death would have to be verified before Australia considers repatriating the family.
The shocking photos helped catalyze public opinion behind a high-profile crackdown on militant activity by Australian Prime Minister Tony Abbott, as a result of which the government has secured expanded but controversial security powers.
"Both Mr Elomar and Mr Sharrouf rose to global infamy as a result of pictures that they posted of themselves holding up the heads of pro-Syrian fighters".
Australia issued an arrest warrant for Sharrouf, who had served nearly four years in prison after pleading guilty over a 2005 conspiracy to carry out an attack in Sydney.
"They are criminal thugs who have been carrying out brutal terrorist attacks, putting people’s lives in danger".
Two infamous Australian nationals, who have been fighting along the ISIL Takfiri group in Syria and Iraq, have reportedly been killed.
The grandfather of the young boy pictured holding up the severed head told Sydney's Daily Telegraph he was "ecstatic" to hear of Sharrouf's possible death.
Barrister Charles Waterstreet, who represents Karen Nettleton, the mother of Mr Sharrouf's wife Tara, told the ABC's 7.30 program he is trying to get the family back into Australia. It has not been revealed whether Sharrouf or Elomar were dual nationals.
The reports have come as government MPs are about to see controversial proposed legislation to strip dual-nationality terror supporters of their Australian citizenship.
Sharrouf slipped out of Australia in late 2013 using his brother's passport because his own had been cancelled.
Elomar's postings on social media suggested his popularity among Australians who joined the battle for Islamic State.
In May, Australian media reported that Nettleton was seeking to return home from Syria with the couple's children, where it was believed they had been living in the ISIS stronghold of Raqqa.