Police and intelligence services are analysing footage of Foley's death for clues amid suggestions that the Islamic State (Isis) extremist — who has been reportedly identified by a former hostage as "John" — is from London.
A former hostage, who was held for a year in the Syrian town of Raqqa, told British newspaper Guardian the killer was the ringleader of a trio of UK-born extremists the captives nicknamed "The Beatles" because of their nationality.
Guardian's Martin Chulov told Sky News: "We spoke to a hostage today who was released several months ago and he clearly identified to us this man in the video.
"He was the leader of the pack, someone who was very assertive and was responsible for negotiations with hostage families and certainly had spoken to many mums, dads, (and) wives on Skype."
They are "very much at the forefront of this conflict" with roles ranging from suicide bombers to executioners, he added.
Shiraz Maher, a senior researcher at the International Center for the Study of Radicalization at King's College London, said Foley's death was evidence that British jihadists were "some of the most vicious and vociferous fighters" in the Middle East.
A US special operations mission tried and failed to free Foley and other hostages in Syria weeks before he was murdered by militants, officials have confirmed.
The White House and Pentagon released statements on Wednesday confirming that President Barack Obama personally authorized the July raid on an oil refinery in northern Syria.
A screenshot from undated video of a masked Islamic State jihadist, believed to be a British citizen named 'John', holding a knife speaking next to man purported to be James Foley at an unknown location.
The mission failed because the hostages, thought to have been held there in the weeks leading up to the operation, had recently been moved.
The several dozen special operations troops who were dropped by aircraft into Syria did not find them and engaged in a firefight with IS militants before departing.
The officials said a number of militants, but no Americans, were killed. One American suffered a minor injury when an aircraft was hit.
In this November 2012 file photo, posted on the website freejamesfoley.org, shows American journalist James Foley while covering the civil war in Aleppo, Syria. (Via AP)
David Cameron and Obama have condemned the murder of Foley as "hateful" and "barbaric", insisting it would not force them to back away from tackling IS in Iraq and Syria.
Cameron, who has since resumed his holiday in Cornwall after returning to Downing Street when the video surfaced, said it seemed "increasingly likely" that the killer was a UK citizen.
Screenshot from undated video shows a masked Islamic State jihadist speaking next to man purported to be US journalist Steven Sotloff at an unknown location.
"Let's be clear what this act is — it is an act of murder, and murder without any justification," Cameron told reporters in No 10.
Obama said "no just God" could condone the killing of Foley, who was seized in Syria in 2012, and Isis would "fail" because they only wanted to destroy.
The murdered journalist's younger brother Michael criticized the American government, saying he thought it could have done more to save him.
One of the agencies Foley worked for, GlobalPost, has said Isis threatened to execute him a week ago and the US authorities were informed.
The film shows Foley, 40, who worked for organizations including Agence France-Presse and went missing in Syria in 2012, kneeling in a desert-like environment at an unknown location as an IS fighter stands by his side dressed in black and with his face covered.
Diane and John Foley, parents of US journalist James Foley, talk to reporters after speaking with US President Barack Obama, on August 20, 2014 outside their home in Rochester, New Hampshire. (AP photo)
The killer accused America of "aggression towards the Islamic state", adding: "You have plotted against us and gone far out of your way to find reasons to interfere in our affairs."
He said further actions in Iraq by America "will result in the bloodshed of your people".
Another captured journalist, Steven Sotloff, who went missing near the border of Syria and Turkey last year, is also seen. Sotloff's family have launched a petition calling on Obama to do everything in his power to save the journalists life.
The footage has been authenticated by the US and UK, but Scotland Yard has urged people to avoid spreading it through Twitter and Facebook — warning that to do so could be a criminal offence.
The US is thought to be considering an additional deployment of troops to Iraq to help repel the IS offensive that has secured swathes of the country.
But Cameron stressed there would be no "knee jerk" escalation of British military involvement — warning that the west faced a "generational struggle" against Islamist extremism.
"I have been very clear that this country is not going to get involved in another Iraq war. We are not putting combat troops, combat boots on the ground, that is not something we should do."
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