Taxi driver Alan Henning, 47, was delivering aid to Syria in December when he was kidnapped then held hostage by ISIS.
ISIS had threatened to kill Alan Henning in a video showing the killing of Briton David Haines last month.
The UK Foreign Office said it was trying to verify the video, and if true it was a “further disgusting murder”.
On September 30, Alan Henning’s wife Barbara appealed for his release, saying: “He is innocent.”
ISIS has previously released videos showing the apparent killings of two US journalists James Foley and Steven Sotloff, and Briton David Haines.
The video released on October 3 is yet to be verified, but it appears to show Alan Henning kneeling beside a militant, dressed in black, in a desert setting.
The footage ends with an ISIS fighter threatening a man they identify as an American.
The UK Foreign Office said in a statement: “We are aware of the video and are working urgently to verify the contents.
“If true, this is a further disgusting murder.
“We are offering the family every support possible; they ask to be left alone at this time.”
Earlier this week Barbara Henning had asked for “mercy” for her husband, saying his family was continuing their attempts to communicate with the group.
She also she had received an audio message of her husband pleading for his life.
“Muslims across the globe continue to question Islamic State over Alan’s fate,” she said.
Barbara Henning had said some people thought her husband was in the wrong place at the wrong time, but she said: “He was in the right place doing the right thing.”
She said her family was “at a loss” as to why ISIS leaders could not “open their hearts and minds to the truth about Alan’s humanitarian motives for going to Syria”.
Last month, two high-profile imams in the UK made a direct appeal to ISIS to release Alan Henning.
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