President Barack Obama has vowed the US would not be intimidated by the beheading of a second American reporter, but acknowledged the fight against the jihadists would take time.

Obama pledged that justice would be done to the Islamic State (IS) killers of 31-year-old reporter Steven Sotloff, wherever they hid and however long it took.

"The bottom line is this, our objective is clear and that is to degrade and destroy (IS) so that it's no longer a threat not just to Iraq but also the region and to the United States," Obama told a news conference in Estonia overnight.

"Whatever these murderers think they will achieve with killing innocent Americans like Steven, they have already failed," Obama said.

"They failed because, like people around the world, Americans are repulsed by their barbarism. We will not be intimidated."

But he warned that eliminating the threat posed to the region by the group from its bases in Iraq and Syria would take time.

American journalist Steven Sotloff (Center with black helmet) talks to Libyan rebels in 2011. (Getty) (Getty)

IS posted video footage on the internet of Sotloff's beheading, confirmed as authentic by Washington, which sparked outrage around the world.

It said the journalist's killing, which comes on the heels of the beheading last month of another US reporter, James Foley, was in retaliation for expanded US air strikes against its fighters in Iraq over the past week.

It warned a British hostage would be next unless London backs off from its support for Washington's air campaign.

Obama said the whole world had been repulsed by the barbarism of Sotloff's murder, but "we will not be intimidated".

"Those who make the mistake of harming Americans will learn that we will not forget and that our reach is long and that justice will be served," he said on overnight.

Obama said Washington was determined to halt the IS threat, but warned it would depend on close co-operation with partners in the region.

He has previously admitted that his administration has yet to develop a comprehensive strategy for tackling IS on both sides of the Iraq-Syria border.

Washington has ruled out any air strikes for now against IS fighters on the Syrian side, where they hold a large swathe of the east.

Obama has also ruled out any co-operation with the Damascus regime against IS, for fear that it would drive other Sunni rebel groups in Syria into alliance with the jihadists.

British Prime Minister David Cameron said the video depicted an "absolutely disgusting, despicable act" and convened a meeting of security chiefs to discuss how to tackle the IS threat.

The masked executioner in the video spoke with a London accent and claimed to be the same man, confirmed by UK security services as a Briton, who beheaded Foley.

"I'm back, Obama, and I'm back because of your arrogant foreign policy towards the Islamic State," the black-clad jihadist says, wielding a combat knife.

"So just as your missiles continue to strike the necks of our people, our knife will continue to strike the necks of your people," he declares, before reaching round to cut his captive's throat.

The militant condemns US air strikes against IS fighters around both Mosul Dam in the north and the Shi'ite Turkmen town of Amerli further south, which dates the video to the past week.

In a statement, the Sotloff family, who live in Miami, said: "The family knows of this horrific tragedy and is grieving privately. There will be no public comment from the family during this difficult time."

After Foley's death, Sotloff's mother Shirley had addressed a video message to IS leader Abu Bakr al-Baghdadi pleading for her son's life, and insisting he had no influence on US policy.

Sotloff's former employers at Time and Foreign Policy paid tribute to a man widely respected for his intrepid reporting in Syria and the wider region, including a previous stint in Libya.

Hours after the posting of the video, the White House announced that Obama had authorised about 350 more US troops to beef up security at US diplomatic facilities and protect personnel in Baghdad.

Additional reporting by AFP.