Images in the video were consistent with that of the filmed executions of two American journalists, James Foley and Steven Sotloff, in the past month.
Haines, a 44-year-old father of two from Perth, Scotland, was kidnapped last year while working for the French agency ACTED.
The video entitled, "A Message to the Allies of America," opened with British Prime Minister David Cameron talking about working with the Iraqi government and allied Kurdish Peshmerga forces to defeat the ISIL, Reuters reported.
"This British man has to pay the price for your promise, Cameron, to arm the Peshmerga against the Islamic State," said a masked man dressed in black with a British accent, standing over Haines, who was shown kneeling and wearing an orange jumpsuit.
The video then showed the beheading of the kneeling man.
At the end of the video, another hostage, identified as Alan Henning, was shown and the masked man said he would be killed if Cameron continued to support the fight against ISIL.
Paris-based ACTED previously said Haines had been engaged in humanitarian work since 1999, helping victims of conflicts in the Balkans, Africa and the Middle East and that he was taken hostage in March 2013 in Syria.