David Cameron the UK would “hunt down” the killers of the aid worker, whom he called a “British hero”.
He said the “menace” of ISIS had to be destroyed in a “calm, deliberate” way.
In the video released by ISIS militants, they also threatened to kill a second Briton, who has been named as Alan Henning, 47.
Alan Henning, a married father-of-two from Salford, worked as a taxi driver and was a volunteer on an aid convoy.
Speaking at Downing Street after a meeting of the UK emergency committee Cobra, David Cameron said of ISIS, also known as ISIL, “they are not Muslims, they are monsters”.
“We will do everything in our power to hunt down these murderers and ensure they face justice, however long it takes.”
In the video, a masked man who appears to have a British accent was pictured beside David Haines holding a knife.
David Cameron said the country was “sickened” that a Briton could have carried out the “despicable” killing.
“We cannot just walk on by if we are to keep this country safe,” he said.
“Step by step, we must drive back, dismantle and ultimately destroy ISIL and what it stands for.
“We will not do so on our own, but with working with our allies, not just in the United States and in Europe, but also in the region.”
He said the organization posed a “massive threat” to the entire Middle East and said it would be defeated through a “comprehensive and sustained counter-terrorism strategy”.
The prime minister added: “This is not about British combat troops on the ground. It is about working with others to extinguish this terrorist threat.”
US officials later said several Arab countries had offered to take part in air strikes against ISIS militants in Iraq – subject to approval from the Iraqi government.
Secretary of State John Kerry – speaking in Paris after a whirlwind tour of the Middle East trying to drum up support for action against ISIS – said he was “extremely encouraged” by such promises.
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