Downing Street says it 'has strong reason to believe' that Edwin Dyer has been killed.
The following message was posted on an Islamist website:
"The British captive was killed so that he, and with him the British state, may taste a tiny portion of what innocent Muslims taste every day at the hands of the Crusader and Jewish coalition to the east and to the west."
Dyer was seized at an African music festival in Niger by militants demanding the release of hate preacher Abu Qatada, currently held in a British prison awaiting extradition to Jordan.
From the BBC:
Mr Dyer, who spoke fluent German and had been working in Austria, was kidnapped in Niger on 22 January, close to the border with Mali.
He was captured along with a number of other European tourists, including two Swiss and one German. The group had been visiting the Anderamboukane festival on nomad culture.
In a statement issued on Wednesday, Mr Brown said: "We have strong reason to believe that a British citizen, Edwin Dyer, has been murdered by an al-Qaeda cell in Mali.
"I utterly condemn this appalling and barbaric act of terrorism.
"My thoughts are with Edwin Dyer's family. I offer them the condolences of the whole country."
Mr Brown said the killing reinforced Britain's "commitment to confront terrorism".
"It strengthens our determination never to concede to the demands of terrorists, nor to pay ransoms," he added.
Most of the other hostages have been released, but one Swiss man remains in captivity and the British government urged the kidnappers to release him "immediately and unconditionally".
BBC security correspondent Frank Gardner said Mr Dyer was believed to have been kidnapped by local tribesmen and sold on to Algerian members of al-Qaeda in Mali.
British officials had been using intermediaries to try to secure Mr Dyer's release, our correspondent said.
Other European countries are understood to have paid ransoms to secure their hostages' release, but the British government has a blanket policy against such methods, he added.
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HUMAN SACRIFICE IN ISLAM - Sacred ritual murder accompanied by chants of 'Allah Akhbar!'
This post has been cited in my updated map.
I am unable to keep up with the avalanche of developments. Would you be interested in helping me with the mapping workload? There will be a lot mapping to do when the Euro Election results come due in a few days.
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