A second captive, said to be US reporter Steven Sotloff, is shown alive, along with a warning that his fate rests on US President Barack Obama ordering a halt to strikes against the jihadist group.

"We have never been prouder of our son Jim. He gave his life trying to expose the world to the suffering of the Syrian people," Foley's mother Diane said in a Facebook message to supporters.

"We implore the kidnappers to spare the lives of the remaining hostages.

Like Jim, they are innocents. They have no control over American government policy in Iraq, Syria or anywhere in the world.

"We thank Jim for all the joy he gave us. He was an extraordinary son, brother, journalist and person. Please respect our privacy in the days ahead as we mourn and cherish Jim."

The White House said US intelligence was studying the video, and that President Barack Obama had been briefed on it as he flew from Washington to resume his vacation on Martha's Vineyard.

"If genuine, we are appalled by the brutal murder of an innocent American journalist and we express our deepest condolences to his family and friends,"

National Security Council spokeswoman Caitlin Hayden said.

Foley was an experienced correspondent who had covered the war in Libya before heading to Syria to follow the revolt against Bashar al-Assad's regime, contributing to news site GlobalPost, Agence France-Presse (AFP) and other media outlets.

"On behalf of John and Diane Foley, and also GlobalPost, we deeply appreciate all of the messages of sympathy and support that have poured in since the news of Jim's possible execution first broke," said GlobalPost co-founder and CEO Philip Balboni.

AFP chairman Emmanuel Hoog said: "James was working as a brave, independent and impartial journalist covering the dangerous Syrian conflict when he was kidnapped in November 2012.

"His work for AFP and other media organizations was widely admired. Nothing could justify his incarceration or any threats against his life. Our thoughts are with his family at this very difficult time."

According to witnesses, Foley was seized in the northern Syrian province of Idlib on November 22, 2012. Sotloff, whose kidnapping in August last year has not been widely reported, has written for several US newspapers and magazines, including Time, Foreign Policy and The Christian Science Monitor.

In the nearly five-minute video, titled "A Message to America" and distributed online by known Islamic State sources, the group declares that Foley was killed after Obama ordered air strikes against IS positions in northern Iraq.

The execution is carried out in an open desert area with no immediate signs as to whether it is in Iraq or Syria by a black-clad masked militant who speaks English with a British accent.

Foley is seen kneeling on the ground, wearing an orange outfit that resembles those worn by prisoners held at the US naval base at Guantanamo Bay.

"Any aggression towards the Islamic State is an aggression towards Muslims from all walks of life who have accepted the Islamic caliphate as their leadership," the masked militant declares.

Formerly known as the Islamic State of Iraq and the Levant, the hardline IS declared itself a caliphate -- a successor state to historic Muslim empires -- in June this year. 

Formed by a mixture of former Sunni insurgents who fought US and Shiite-led government forces in Iraq and anti-regime rebels in Syria, it has attracted recruits from around the world.

In recent weeks it has laid claim to a wide swathe of eastern Syria and northern Iraq, seizing the major Iraqi city of Mosul and threatening to advance on Kurdish territory and south towards Baghdad.

Earlier this month, Obama reacted by ordering US warplanes to strike IS positions and vehicles that threatened US facilities in the Kurdish capital Arbil or to kill refugees from religious minority groups.

This week, backed by US strikes, Kurdish and Iraqi forces dislodged IS fighters from a key dam north of Mosul, in the group's first major battlefield reverse since it declared the caliphate. (AFP)