The Islamic State group, which has claimed wide swaths of territory across Syria and Iraq and declared itself a caliphate, said Mr Sotloff’s killing was retribution for continued US air strikes targeting its fighters in Iraq.
It killed American journalist James Foley last month in the same manner and again threatened to kill another hostage.
Mr Sotloff, 31, who freelanced for Time and Foreign Policy magazines, had last been seen in Syria in August 2013 until he appeared in a video released online last month by the IS group that showed the beheading of Mr Foley.
Dressed in an orange jumpsuit against the backdrop of an arid Syrian landscape, Mr Sotloff was threatened in that video with death unless the US stopped air strikes on the group in Iraq.
In the video distributed today and entitled “A Second Message to America,” Mr Sotloff appears in a similar jumpsuit before he was purportedly beheaded by an IS fighter.
The Associated Press could not immediately verify the video’s authenticity. The SITE Intelligence Group, a US terrorism watchdog, first reported about the video’s existence.
Unlike Mr Foley’s beheading, which was widely shared on Twitter accounts affiliated with the Islamic State group, the video purporting to show Mr Sotloff’s killing was not immediately posted online, though several jihadi websites told users to expect it today.
In Washington, State Department spokeswoman Jen Psaki said US intelligence analysis will “work as quickly as possible” to determine if the video of the beheading is authentic.
“If the video is genuine, we are sickened by this brutal act, taking the life of another innocent American citizen,” Ms Psaki said. “Our hearts go out to the Sotloff family and we will provide more information as it becomes available.”
Ms Psaki said it’s believed that “a few” Americans are believed to still be held by the Islamic State but would not give any specifics.
The fighter who beheads Mr Sotloff in the video called it retribution for President Barack Obama’s continued air strikes against the group in Iraq.
“I’m back, Obama, and I’m back because of your arrogant foreign policy towards the Islamic State ... despite our serious warnings,” the fighter said. “So just as your missiles continue to strike our people, our knife will continue to strike the necks of your people.”
At the end of the video, he threatened to kill a third captive.
Mr Sotloff’s mother had pleaded for his release last week in a video directed at the IS group.
Addressing the leader of the group by name, Shirley Sotloff said in a video her son was “an innocent journalist” who shouldn’t pay for US government actions in the Middle East over which he has no control.
White House press secretary Josh Earnest said he wasn’t immediately aware of the purported Sotloff video and wasn’t in a position to confirm its authenticity.
“This is something that the administration has obviously been watching very carefully,” Mr Earnest said. “Our thoughts and prayers first and foremost are with Mr Sotloff and Mr Sotloff’s family and those who worked with him.”
The IS group which has taken over a third of Syria and Iraq has terrorised rivals and civilians alike with widely publicised brutality as it seeks to expand a proto-state it has carved out on both sides of the border.
In its rise to prominence over the past year, the group has frequently published graphic photos and gruesome videos of everything from bombings and beheadings to mass killings.