Kassig, a 26 year-old former U.S. Soldier had converted to Islam in captivity and also went by the name Abdul Rahman Kassig.
Following his return to civilian life, he became an aid worker in Syria, where he was captured and held hostage for over a year.
ISIS had threatened to kill Kassig in a previous video which showed the beheading of British aid worker, Alan Henning.
The US says it is working to determine the authenticity of the video, which also shows a mass killing of Syrian troops.