In the new video the group also threatened to kill another captive David Cawthorne Haines, a Briton. A US spokeswoman said Washington was trying to authenticate the "sickening" footage. British Prime Minister David Cameron said it depicted an "absolutely disgusting, despicable act."
Related to: Mum pleads for life of Islamic State hostage
The death comes two weeks after the group released a video showing the murder of James Foley, another US journalist, which a masked member of the Islamic State claims was revenge for US attacks on its fighters in Iraq.
In that video, Sotloff was pictured, with the fighter saying his life depended on US president Barack Obama's next move. The killer in appears to be the same man in both videos - a British-accented man dressed in black fatigues and balaclava. Internet monitors who have viewed both videos said that Sotloff's hair was longer in the second. Less than a week ago, Sotloff's mother, Shirley, directly addressed the group's leader Abu Bakr al-Baghdadi in an appeal for his release less than a week ago.
"You, the caliph, can grant amnesty. I ask you, please, release my child. I ask you to use your authority to spare his life,'' Mrs Sotloff said in the video. Jan Psaki, of the US state department, said authorities were working to authenticate the video.
"If true, we are sickened by this brutal act. Our hearts go out to the Sotloff family," she said. Several westerners are being held hostage by rebel groups in Syria.
On August 24, al-Qaeda's Syrian affiliate the Nusra Front freed the American writer, Peter Theo Curtis, who had been missing since 2012, following what officials said were efforts by the Gulf state of Qatar.