He said the murder of taxi driver Alan Henning is "abhorrent and senseless" after a video purporting to show the 47-year-old father of two being beheaded by militants emerged last night.
The Salford taxi driver was delivering aid to Syria inDecember when he was kidnapped and then held hostage by IS.
Cameron described him as a "kind, gentle, compassionate and caring man".
"The murder of Alan Henning is absolutely abhorrent, it is senseless, it is completely unforgivable. Anyone in any doubt about this organisation can now see how truly repulsive it is, and barbaric it is," he said of IS.
The Prime Minister is meeting with officials from intelligence agencies, the military and the Foreign Office at his official country residence Chequers to discuss the killing, Downing Street said.
The footage shows Henning kneeling beside a knifeman dressed in black in a desert setting.
It is the second such murder of a UK hostage after fellow aid worker David Haines was killed last month.
Two American journalists, James Foley and Steven Sotloff, were also beheaded by the terrorist organisation, which is also known as Isil.
Cameron, who last night arrived back in the UK after visiting British troops including those engaged in air strikes on IS in Iraq, said: "The brutal murder of Alan Henning by Isil shows just how barbaric and repulsive these terrorists are.
"My thoughts and prayers (tonight) are with Alan's wife Barbara, their children and all those who loved him.
"We will do all we can to hunt down these murderers and bring them to justice."
The gruesome video appears to show Henning, who is dressed in orange, say: "I am Alan Henning. Because of our Parliament's decision to attack the Islamic State, I, as a member of the British public, will now pay the price for that decision."
The killer, who speaks with a British accent and is believed to be the man responsible for the previous beheadings, then makes a direct statement to the British Prime Minister: "The blood of David Haines was on your hands, Cameron. Alan Henning will also be slaughtered, but his blood is on the hands of the British Parliament."