The Islamic State has reportedly beheaded one Japanese hostage and offered a swap for the other who is still in their hands, RIA Novosti reported.
The video, which was distributed by IS-linked Twitter accounts, shows Japanese captive Kenji Goto holding a photo of his beheaded fellow hostage, Haruna Yukawa.
"I am Kenji Goto Jogo. You have seen the photo of my cellmate Haruna [Yukawa] slaughtered in the land of the Islamic Caliphate. You were warned," the voice said in the video, distributed by IS-linked Twitter accounts.
Japanese government is still verifying the execution video. Chief Cabinet Secretary Yoshihide Suga said the recording appeared to show captive Haruna Yukawa being killed.
"This is an outrageous and unacceptable act," Suga said. "We strongly demand the prompt release of the remaining Mr. Kenji Goto, without harm."
On Monday, IS released a video demanding $200 million in ransom within 72 hours for the two Japanese hostages seized in Syria last year: freelance journalist Kenji Goto and Haruna Yukawa, who went to the country to fight along with Syrian rebels. The ultimatum expired on Friday at 5:50 GMT.
The demanded ransom is equal to the sum of aid pledged by Japanese Prime Minister Shinzo Abe to help countries fighting Islamic State.
IS militants stated that by providing financial assistance in the fight against the group, Tokyo participated in the "crusade" against the Islamists.
Tokyo insists that assistance to countries affected by the expansion of Islamic State has exclusively non-military character and is directed particularly at humanitarian aid for displaced persons in Syria and Iraq.
IS jihadists began fighting the Syrian government in 2012 and later expanded operations to Iraq and declared a caliphate in the territories they control in both countries. The US-led international coalition has been performing airstrikes on IS targets since September 2014 after an escalation in the atrocities committed by the extremist group.