Extremist group Islamic State (IS) published a video of the moments before and after James Foley was beheaded.
Unconfirmed reports suggest the man in the video - who had an English accent - is from London or south-east England and may have guarded IS captives.
Mr Foley, 40, had been missing since he was seized in Syria in 2012.
The FBI is leading the international hunt for his killer, while Scotland Yard is examining the content of the video.
Since the footage was released, American forces have carried out 14 air strikes targeting IS militants near the Mosul dam in northern Iraq.
Fighting has been continuing in the area since Iraqi and Kurdish forces recaptured the strategically important dam from IS earlier this week.
US mission Prime Minister David Cameron said on Wednesday it looked "increasingly likely" the man thought to be involved in killing Mr Foley was British, but that it was "not a time for a knee-jerk reaction".
Mr Cameron - who broke off from his holiday temporarily on Wednesday - will continue to take calls and briefings, Downing Street said.
The Guardian said the man was thought to be the leader of a group of British fighters based in Syria. The paper said he called himself "John" and was believed to be from London.
Three British jihadists guarding IS hostages in Syria are understood to have been nicknamed John, Paul and Ringo by their captives. The jihadists were collectively known as "the Beatles".
BBC world affairs correspondent Rob Watson said sources had confirmed IS had been using three British jihadists to guard foreign prisoners.
Meanwhile, officials have said the US launched an unsuccessful mission to try to free Mr Foley and other American hostages in the country.
IS fighters have been holding more than 20 foreign hostages.
'Maximum impact' The Metropolitan Police has warned that "viewing, downloading or disseminating" the video might be an offence under terrorism laws.
Erin Saltman, senior researcher at counter-extremism think tank the Quilliam Foundation, said the video represented a "game change". She said it showed IS was now focused on the West.
"It [the video] was created using a British foreign fighter to create maximum impact so that the West could not ignore the figures that are playing out at this moment," she said.
Former MI6 director of global counter-terrorism Richard Barrett told BBC Radio 4's Today programme he believed the man holding a knife in the video would be traced, but there would be "huge problems involved" with bringing him to justice.
He added: "There are courses of action that can be taken and once he is identified then that course of action becomes a lot clearer.
Unconfirmed reports suggest the man in the video - who had an English accent - is from London or south-east England and may have guarded IS captives.
Mr Foley, 40, had been missing since he was seized in Syria in 2012.
The FBI is leading the international hunt for his killer, while Scotland Yard is examining the content of the video.
Since the footage was released, American forces have carried out 14 air strikes targeting IS militants near the Mosul dam in northern Iraq.
Fighting has been continuing in the area since Iraqi and Kurdish forces recaptured the strategically important dam from IS earlier this week.
US mission Prime Minister David Cameron said on Wednesday it looked "increasingly likely" the man thought to be involved in killing Mr Foley was British, but that it was "not a time for a knee-jerk reaction".
Mr Cameron - who broke off from his holiday temporarily on Wednesday - will continue to take calls and briefings, Downing Street said.
The Guardian said the man was thought to be the leader of a group of British fighters based in Syria. The paper said he called himself "John" and was believed to be from London.
Three British jihadists guarding IS hostages in Syria are understood to have been nicknamed John, Paul and Ringo by their captives. The jihadists were collectively known as "the Beatles".
BBC world affairs correspondent Rob Watson said sources had confirmed IS had been using three British jihadists to guard foreign prisoners.
Meanwhile, officials have said the US launched an unsuccessful mission to try to free Mr Foley and other American hostages in the country.
IS fighters have been holding more than 20 foreign hostages.
'Maximum impact' The Metropolitan Police has warned that "viewing, downloading or disseminating" the video might be an offence under terrorism laws.
Erin Saltman, senior researcher at counter-extremism think tank the Quilliam Foundation, said the video represented a "game change". She said it showed IS was now focused on the West.
"It [the video] was created using a British foreign fighter to create maximum impact so that the West could not ignore the figures that are playing out at this moment," she said.
Former MI6 director of global counter-terrorism Richard Barrett told BBC Radio 4's Today programme he believed the man holding a knife in the video would be traced, but there would be "huge problems involved" with bringing him to justice.
He added: "There are courses of action that can be taken and once he is identified then that course of action becomes a lot clearer.
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