The video Tuesday showed a masked man in desert camouflage apparently slitting the throat of a blindfolded man lying on the ground. The victim moaned and a shrill wheeze was heard. The masked man then showed the severed head to the camera before throwing it in the dirt and later resting it on the victim's chest.
Other footage showed a militant with an assault rifle killing the other 11 men, who were lying face down on the ground, with a series of shots into their heads and backs. Blood seeped from their bodies onto the sand.
The apparent mass killing of hostages was a first. Previously, insurgents killed hostages in ones, and perhaps twos, as part of their campaign to force foreign troops and contract workers out of the country.
"America today has used all its force, as well as the help of others, to fight Islam under the so-called war on terror, which is nothing but a vicious crusade against Muslims," a statement on the Web site signed Ansar al-Sunna Army said.
The group also threatened anyone else working with U.S. forces in Iraq, saying executions would befall "every agent, traitor and spy."
Mahat, the Nepalese foreign minister, said his government would help the families "and take action against the people who sent them illegally to this dangerous area for work."
Iyad Mansoor, director-general of the Morning Star Co., a Jordan-based services firm that employed the Nepalese, said he hired them through the Nepal-based Moonlight Co. to work in factories in Jordan.
The Muslim Scholars Association, an influential Sunni Muslim group believed to have links to insurgents, condemned the claimed mass killing, saying such acts did not help Iraq.
"We believe most of them were simple-minded and tempted to come to Iraq," Mohammed Bashar al-Faidi, a spokesman for the group, said of the Nepalese. "We wished they could have been released by the kidnappers so that they could have become messengers for their brothers to warn them not to come to Iraq."
In violence Tuesday:
-Unidentified gunmen killed Ibrahim Ismael, head of the education department in the northern city of Kirkuk, police Col. Sarhat Qadir said. Three of Ismael's bodyguards were wounded.
-In south Baghdad, assailants attacked a police patrol with grenades, killing one officer and wounding two, said Naji Bahr Naji al-Khalidi, an official with Iraq's FPS security force.
-Insurgents attacked a U.S. patrol in Mosul, 225 miles northwest of Baghdad, sparking a gunbattle in which U.S. troops wounded one of the assailants, the Army said. One civilian was killed and a second was wounded in crossfire, Lt. Col. Paul Hastings said.
-Gunmen fired at a car near the town of Latifiyah, 25 miles south of Baghdad, killing Shiite scholar Bashir al-Jazaari and his driver and wounding two passengers, authorities said.
Associated Press writer Binaj Gurubacharya in Katmandu, Nepal, contributed to this report.