Twitter suspended dozens of accounts that published the graphic footage while YouTube tried to remove several copies of the video, which was first uploaded on Tuesday night.
Twitter CEO Dick Costolo tweeted: "We have been and are actively suspending accounts as we discover them related to this graphic imagery. Thank you."
The unprecedented social media clampdown came as the Metropolitan police warned that even viewing the video could constitute a criminal offence in the UK.
The force said in a statement: "The MPS counter-terrorism command (SO15) is investigating the contents of the video that was posted online in relation to the alleged murder of James Foley. We would like to remind the public that viewing, downloading or disseminating extremist material within the UK may constitute an offence under terrorism legislation.""
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