News of the death of Edwin Dyer came as Barack Obama arrived on his first visit as US President to the Middle East to deliver a speech to the Muslim world.
The 60-year-old Briton is said to have been killed on Sunday but the details were not released until today, so the murder could be part of a double message of defiance by Al Qaeda ahead of Obama's speech in the Egyptian capital Cairo today.
Murdered: Edwin Dyer as seen in a video released by his kidnappers in February
The statement from the terrorists said they 'killed Dyer on May 31, finding that Britain is unresponsive and does not seem to care for its citizens'.
It added: 'The British captive was killed so that he, and with him the British state, may taste a portion of what innocent Muslims taste every day at the hands of the Crusader and Jewish coalition to the east and to the west.'
In a new audio tape today - his first since mid-March - Osama Bin Laden threatened Americans, blaming Mr Obama for inflaming hatred of the US by ordering Pakistan to crack down on militants in the Swat Valley and block Islamic law there.
The message was broadcast as the US president touched down in Saudi Arabia - the country of Bin Laden's birth - and came just hours after Al Qaeda deputy leader Ayman Al Zawahri said the Cairo speech would not change the 'bloody messages' the U.S. military is sending Muslims through the wars in Iraq and Afghanistan.
Mr Dyer was abducted four months ago while attending a music festival as a tourist in Niger and is thought to have been sold to Al Qaeda in the Islamic Maghreb, the terror network's North African wing, by a local tribal militia who kidnapped him.
It announced today on its website that Mr Dyer had been killed - with unconfirmed reports saying he had been beheaded - after a deadline set for the release of Qatada from prison in Britain was not met by the government.The radical cleric has been named as Bin Laden's 'Ambassador to Europe'.
Other European and Canadian hostages kidnapped in similar circumstances have been freed after ransoms were paid to secure their release, but the British government has a blanket policy against such dealings - on the grounds it would only encourage similar abductions.
Prime Minister Gordon Brown said there was 'strong reason' to believe 'this appalling and barbaric act of terrorism' was true and offered his condolences to Mr Dyer's family.
Speaking at the start of Commons Question Time, he said there would be 'no hiding place' for those responsible, adding: 'I want those who use terror against this country and British citizens to know beyond doubt that they will be hunted down and brought to justice.
'There will be no hiding place for them and no safe haven for terrorists who attack our country.'
'This tragedy reinforces our commitment to confront terrorism. It strengthens our determination never to concede to the demands of terrorists, nor to pay ransoms.'
Mr Dyer, who had been living and working in Austria for over 20 years and spoke fluent German, was on holiday in West Africa with a German travel operator.
He was abducted, along with a Swiss couple and a German woman, near the border with Niger after attending a festival of nomad culture at Anderamboukane in Mali.
A gun was said to have been fired close to Mr Dyer's head as a signal the tourists would be killed if they resisted.
Local travel company staff later found the shocked cook who was accompanying the tourists. He said he had been subjected to the 'show execution'.
Werner Gartung, chief executive of German tour operator Oase Reisen, said: 'The three cars were still in Mali on the way back to Niger.
'They were arrested by Tuareg with automatic rifles who shot immediately into the tyres of the first car with the four clients.'
It was believed that the hostage-takers were Tuareg rebels, who have regularly clashed with Mali's army, who then sold them to Al Qaeda.
In February Al Qaeda in the Islamic Maghreb claimed responsibility and released a video of the captives with heavily-armed masked gunmen behind.
Two of the captives were released in mid-April but days later the terrorists issued an ultimatum, warning they would kill Mr Dyer unless the UK freed Qatada within 20 days.
The deadline was extended by 15 days to May 30, but in the end frantic efforts to secure the safe release of the Briton failed. A ransom of £8.6 million was also said to have been demanded.
Despite intense behind-the-scenes negotiations by UK and local officials, the hostage-takers claimed yesterday they had carried out their threat to kill Mr Dyer.
The Foreign Office described suggestions that Mr Dyer had been beheaded as 'speculation' and refused to comment on reports that a new video of the body had been released.
Foreign Secretary David Miliband pledged that Britain would continue working to secure the release of the Swiss man still being held by the group.
He said: 'Hostage-taking and murder can never be justified whatever the cause. This tragic news is despite the strenuous efforts of the UK team in the UK and Mali, with valuable help from international partners.'
Hamid Ghomrassa, a security expert in north Africa, said the killing an Bin Laden's warning carried a clear message.
'Al Qaeda's top messages are first, that a day before his expected speech to the Muslim world Obama must understand that Al Qaeda is a force in the region that cannot be ignored,' he said.
'And second, that Al Qaeda's threats should be taken seriously, and from now on the West should understand that paying ransoms to get back hostages is the only way to deal.'
'And second, that Al Qaeda's threats should be taken seriously, and from now on the West should understand that paying ransoms to get back hostages is the only way to deal.'
News of Mr Dyer's death came on the same day AQIM killed eight policeman and two college teachers after targeting a police convoy in Algeria. Militants detonated a home-made bomb and then opened fire during the attack in the eastern Boumerdes region. The rebels, numbering at least 30, killed one wounded policeman by slitting his throat.
ABU QATADA, RADICAL CLERIC WANTED THE WORLD OVER
Abu Qatada has been described as Osama bin Laden's 'ambassador in Europe' and is wanted on terrorism charges in nine different countries.
The radical cleric had close links to both 9/11 plotter Zacarias Moussaoui and shoe bomber Richard Reid. Law Lords ruled in February that he could be deported back to his native Jordan.
Qatada was convicted, in his absence, of plotting a series of bomb attacks in the Jordanian capital, Amman, in 1998 and for his involvement with terrorists planning a series of explosions there on millennium night.
The Law Lords ruling came after nearly four years of legal wranglings after the preacher was arrested shortly after the 7 July bombings.
Qatada was controversially released from custody last year to his west London home under a 22-hour home curfew after a court ruled it would breach his human rights to deport him.
However, he was re-arrested in November over fears he was planning to abscond. Qatada was granted asylum in the UK in 1993 after arriving on a forged passport.
Abu Qatada has been described as Osama bin Laden's 'ambassador in Europe' and is wanted on terrorism charges in nine different countries.
The radical cleric had close links to both 9/11 plotter Zacarias Moussaoui and shoe bomber Richard Reid. Law Lords ruled in February that he could be deported back to his native Jordan.
Qatada was convicted, in his absence, of plotting a series of bomb attacks in the Jordanian capital, Amman, in 1998 and for his involvement with terrorists planning a series of explosions there on millennium night.
The Law Lords ruling came after nearly four years of legal wranglings after the preacher was arrested shortly after the 7 July bombings.
Qatada was controversially released from custody last year to his west London home under a 22-hour home curfew after a court ruled it would breach his human rights to deport him.
However, he was re-arrested in November over fears he was planning to abscond. Qatada was granted asylum in the UK in 1993 after arriving on a forged passport.
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