The release, which took place via social media site Telegram, was likely timed to coincide with Christmas festivities.
Responsibility for the attack was claimed by the West Africa Province of ISIS.
This faction, which swore allegiance to ISIS in 2015, was formerly known as Boko Haram.
Nigerian President Muhammadu Buharin condemned the atrocity saying he is “profoundly saddened and shocked by the death of innocent hostages in the hands of remorseless, godless, callous gangs of mass murderers that have given Islam a bad name through their atrocities”.
The President added: “We should, under no circumstance, let the terrorists divide us by turning Christians against Muslims because these barbaric killers don’t represent Islam and millions of other law-abiding Muslims around the world.”
An earlier ISIS video claimed the hostages had been captured in the northeastern Nigerian states of Yobe and Borno.
Islamist fundamentalists have been active in these parts of the country for some time.
The ISIS terror group claimed the beheadings were carried out in retaliation for the killing of their leader Abu Bakr al-Baghdadi in October.
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Speaking to a journalist one of its spokesman said: “We killed them as revenge for the killing of our leaders, including Abu Bakr al-Baghdadi.”
However ISIS has a long history of murdering civilians, including via beheading, before their leader was killed in a US special forces raid.
Al-Baghdadi died after detonating a suicide vest, which also killed three of his children, as US troops moved in on October 26.
Militants loyal to ISIS have carried out a number of deadly attacks on Nigeria and surrounding countries over the past year.
In August three Nigerian soldiers were killed in a gun battle in Borno State.
Earlier on March 22 at least 23 Chadian soldiers were killed in an ISIS attack.
According to local media Nigerian troops killed 30 ISIS fighters as they tried to infiltrate Damaturu on December 23.