The Prime Minister expressed his revulsion after Islamic State (IS) released footage last night showing the apparent beheading of hostage Steven Sotloff. It follows last month's killing of James Foley, also from America.
The British man is believed to be an aid worker who was based on the Turkish border of Syria working with war victims. The masked killer is thought to be the British-born "Jihadi John" extremist who carried out the murder of Mr Foley.
Mr Cameron announced he is chairing a meeting of the UK Government's Cobra emergency committee this morning. He said of the latest killing: "It is an absolutely disgusting and despicable act."
The Foreign Office said it was urgently investigating the reports of a threat to another hostage, and attempting to verify the tape.
A Scottish Government spokeswoman said: "Scottish Ministers are aware of the situation and are being kept informed by the Foreign & Commonwealth Office."
Labour leader Ed Miliband said: "The killing by [IS] of another hostage and the threat of more violence demonstrates again their murderous barbarism. Their cold-blooded brutality against the innocent offends the values of people throughout the world. This shows that they are a threat which cannot be ignored."
Mr Sotloff, a freelancer for Time magazine, is pictured in an orange jumpsuit against a desert backdrop.
He reads out a purported "message to America" in which he tells US President Obama that he is "paying the price of your interference with my life".
Dressed in black and wielding a short knife, the extremist also warns other governments against entering "this evil alliance of America against the Islamic State".
The video ends with another man, thought to be British, being threatened.