The Islamic State has released a video in which it claims to have beheaded Steven Sotloff, an American freelance journalist who had been held captive by the group after disappearing a year ago in Syria.

This follows the beheading of James Foley, another American journalist kidnapped in Syria, which was shown in a video circulated by the Islamic State on August 19.

The latest video, which lasts just under three minutes and was produced by the militant group's al-Furqan Media Foundation, was circulated to the media by SITE Intelligence Group, an intel subscription-based service.

In the video, Sotloff said he is "paying the price" for US involvement in Iraq.

"You've spent billions of US tax payers dollars and we've lost thousands of our troops in our previous fighting against the Islamic State, so where is the people's interest in reigniting this war?" he said, according to a transcript provided by SITE.

The same masked fighter who appeared in the video of Foley's beheading is also shown in the latest video.

"I'm back, Obama, and I'm back because of your arrogant foreign policy towards the Islamic State, because of your insistence on continuing your bombings and [unclear] on Mosul Dam, despite our serious warnings," he says, according to the transcript. "We take this opportunity to warn those governments that enter this evil alliance of America against the Islamic State to back off and leave our people alone."

Last month, the US launched a series of air strikes on the Islamic State's targets in Iraq, in an attempt to contain the group's fast advance there.

The US State Department said in a statement that the "Intelligence community is now working to determine authenticity of the video reportedly showing the murder of Steve Sotloff."

State Department spokesperson Jen Psaki said, "If the video is genuine we are sickened by this brutal act taking the life of another innocent American citizen; our hearts go out to the Sotloff family and we will provide more information as it becomes available."

Commenting on the matter, British Prime Minister David Cameron said "I've just seen the news. It's an absolutely disgusting and despicable act and I will be making a statement later."