The footage appearing to show the killing of Steven Sotloff, who worked for the magazine Time, provoked fresh political anger in the UK and brought devastation to his family just days after they had pleaded for his release.
It followed the murder of the American journalist James Foley in a similar Jihadist video and raised the stakes in the confrontation between Islamic State (IS) and the US over air strikes in Iraq.
The video also contained a further chilling threat to murder another man, claimed by the masked killer in the video to be British. It was understood last night that this man was educated in Scotland and had been an aid worker based on the Turkish border of Syria.
The White House said its thoughts were with Mr Sotloff's family and staff were attempting to verify the footage.
Spokesman Josh Earnest said: "This is something that the administration has been watching very carefully since this threat against his life was made a few weeks ago. Our thoughts and prayers first and foremost are with Mr Sotloff's family, and those who worked with him. The United States has dedicated significant time and resources to trying to rescue Mr Sotloff."
A spokesman for Mr Sotloff's family said they "know of this horrific tragedy and are grieving privately".
In both videos the captives wore orange jumpsuits and a masked man speaking with an apparently English accent brandished a knife.
In a personal message to US President Barack Obama in the latest video, the killer said he had returned because of Mr Obama's "arrogant" foreign policy towards the Islamic State. He cited recent bombing campaigns by the US in Amerli, Zumar and the Mosul Dam. He added: "So just as your missiles continue to strike our people, our knife will continue to strike the necks of your people."
In the video, Mr Sotloff, who was kidnapped in Syria in August last year, describes himself as "paying the price" for the US intervention in Iraq.
Mr Sotloff's apparent death came despite a plea from his mother to the self-proclaimed caliph of the Islamic State, Abu Bakr al Baghdadi, last week.
She said that he had no control over what the US Government did and "should not be held responsible for its actions."
She said: "Steven is a journalist who travelled to the Middle East to cover the suffering of Muslims at the hands of tyrants. Steven is a loyal and generous son, brother and grandson. He is an honorable man and has always tried to help the weak."
In the UK, Prime Minister David Cameron and Labour leader Ed Miliband condemned the latest development. Their views were echoed by Muslim leaders.
Sayed Razawi, an Imam from south London, said the killings were a perversion of their faith.
He said: "The first reaction on hearing the news for many of us was shock and horror. It shouldn't surprise us because of what IS has done in the past.
"But it is very shocking when someone like IS carries out such barbaric actions in your name.
"I have been in contact with Imams tonight and they are all saying 'this isn't in our name' - it is not Islam."
Mr Razawi, joint secretary of the Majlis-e-Ulama, the Ulama Council in Europe that represents the majority of Shia Muslims in the United Kingdom and Europe, said he hoped the majority of people would realise that IS did not represent the Muslim faith.
He said: "We have been condemning IS from the beginning. If anyone is getting 'inspiration' from IS then we would strongly urge them to get in touch with their Imam and go back to the source of Islam."