Islamic State militants have released an appalling new video that purports to show a boy shooting dead a 19-year old Israeli-Arab, accused of being an Israeli spy, who was taken hostage by the militant group.

The video shows a man identified as Muhammad Said Ismail Musallam dressed in an orange jumpsuit and confessing to being a spy for Israel's intelligence agency, Mossad, before he is shot dead by a boy aged 10.

The film showed Musallam re-enacting his training and discussing how much he would be paid to spy on ISIS. A young boy is seen leading Musallam by the back of his neck through grass in slow motion, before the camera shows the child and a militant, both dressed in camouflage, stood behind a kneeling Musallam.

The child, who is described by the militant as one of the "cubs of the caliphate," is led in front of Musallam and appears to shoot him in the head.

Israel's Shin Bet internal security agency said that it announced earlier this year that Musallam had left for Turkey to fight with ISIS.

Last month, Isis published a purported interview with Musallam in the militants' online magazine Dabiq.

The video has not been independently verified but was released by the terror group's Furqan media arm and displayed the Isis flag in one corner.

Musallam's father claimed his son was not a Mossad spy. He said Musallam had travelled to Syria four months before. Musallam contacted the family online from the extremists' de facto capital of Raqqa and said he wanted to return home, his father said.