The execution is the second one carried out by the Islamic State on an American citizen in recent weeks, following the murder of James Foley last month.
Sotloff, who freelanced for Time and Foreign Policy magazines, had appeared in the clip that showed the beheading of Foley.
Dressed in an orange jumpsuit against the backdrop of an arid Syrian landscape, Sotloff was threatened in that video with death unless the US stopped airstrikes on the group in Iraq.
In the video distributed today and entitled “A Second Message to America”, Sotloff appears in a similar jumpsuit before he is allegedly beheaded by an Islamic State fighter.
The White House said it could not immediately confirm reports the video had been released.
White House spokesman Josh Earnest said US officials were checking the reports.
The US has recently carried out dozens of air strikes against IS targets in Iraq.
White House spokesman Josh Earnest: “Our thoughts and prayers are with Mr Sotloff and his family”
Mr Sotloff reads out a text addressed to Mr Obama saying: “You’ve spent billions of US taxpayers’ dollars and we have lost thousands of our troops in our previous fighting against the Islamic State, so where is the people’s interest in reigniting this war?”
The masked man then describes the act he is about to commit as retribution for the US air strikes.
“I’m back, Obama, and I’m back because of your arrogant foreign policy towards the Islamic State… despite our serious warnings,” the man says.
“We take this opportunity to warn those governments that enter this evil alliance of America against the Islamic State to back off and leave our people alone.”
The video ends with the militant threatening to kill a captive who is claimed to be British.