The video shows the aftermath of a beheading, in which the victim is not clearly recognizable. CNN has not been able to confirm the authenticity of the video nor the identity of the victim.
Kassig, 26, who converted to Islam in captivity, also went by the name Abdul Rahman Kassig.
He went to the Middle East as a U.S. soldier and returned as a medical worker, feeling compelled to help victims of war.
After returning to civilian life, he did aid work in Syria, where he was captured. He has been held hostage for over a year, informs Report.
Kassig's life was threatened last month in an ISIS video that showed the apparent beheading of British aid worker Alan Henning.
A week after the video's release, Kassig's family released a YouTube video of its own, asking his captors to show mercy and free him.
Kassig's mother, Paula, addressed her son in the video. "We are so very proud of you and the work you have done to bring humanitarian aid to the Syrian people," she said.
The couple noted they were releasing the video on the same day of Islam's Eid al-Adah, or the Festival of Sacrifice, when Muslims slaughter lambs, goats, sheep and cattle and distribute the meat to the poor and their families.
A native of Indiana, Peter Kassig founded Special Emergency Response and Assistance, a nongovernmental organization aiding Syrians fleeing the civil war there.
From 2012, he delivered food and medical supplies within and outside Syria and provided trauma care and training, his family said.
But on October 1, 2013, he was "detained" on his way to Deir Ezzor in eastern Syria while performing a project for SERA, his family said.