The Bush administration has vowed to catch the killers of American hostage Nick Berg who filmed themselves cutting off his head after seizing him in Iraq.
Mr Berg's family knew he had been beheaded before news of the video
There has been widespread revulsion in the US after a video of his killing was shown on an Arabic-language website.
His captors said they were avenging the abuse of Iraqi detainees, new images of which will be shown to senators later.
The CIA is checking claims that top al-Qaeda suspect Abu Musab al-Zarqawi was involved in the killing of Mr Berg.
The grainy pictures of the murder were preceded by a caption announcing that al-Zarqawi would carry out the killing.
The BBC's Justin Webb, in Washington, says the murder has produced a rare moment of political unity amid the increasingly partisan divisions over the abuse of Iraqi prisoners by US soldiers.
But Nick Berg's distraught family have partly blamed the US-led coalition for creating the circumstances in which he was abducted, about a month ago.
'Enemies of freedom'
For reasons that are not yet clear Mr Berg - a telecoms worker - was arrested by Iraqi police two months ago and handed over to the coalition authorities.
According to his family he was held by them for 13 days before being released without charge. Mr Berg's father, Michael, said his son had been trying to come home before the violence in Iraq worsened.
Mr Berg said the fact that his son was Jewish may have exacerbated his predicament.
"If there was any doubt that they were going to kill him that probably clinched it, I'm guessing," he said.
White House spokesman Scott McClellan said: "It shows the true nature of the enemies of freedom.
"They have no regard for the lives of innocent men, women and children. We will pursue those who are responsible and bring them to justice."
Democratic presidential hopeful John Kerry, who has been blaming Mr Bush's policies for US abuses in Iraq, described the killing as senseless.
"I'm horrified and deeply saddened by the senseless murder of Nicholas Berg," he said.
In other reaction, the UK government described the beheading as utterly repugnant, and Australia said it was barbaric.
The BBC's David Wills in Baghdad says many ordinary Iraqis reacted with shock to the killing.
Many said they wanted to see those who had participated in the abuse punished but that did not extend to such brutal treatment of foreign citizens.
Prison video diary
News of Mr Berg's killing came as American politicians negotiated with the Pentagon over the precise arrangements for a viewing of all the remaining photographs and video images of the abuse of prisoners by American troops.
CBS television is understood to be going ahead with the broadcast later on Wednesday of a video diary by a female American soldier who worked at two prison camps in Iraq, our correspondent says.
The video does not show scenes of abuse but the soldier is said to talk flippantly of Iraqi prisoners dying and makes it clear she does not see their safety as important.
Members of both houses of Congress are also due to have the opportunity to view more pictures of abuse in possession of the Pentagon on Wednesday.
Nick Berg's abductors said they had offered to exchange him for inmates at Baghdad's Abu Ghraib prison but the coalition authorities had, they said, refused.