News of the execution by a group linked to suspected al Qaeda operative Abu Mussab al-Zarqawi prompted a major Turkish truckers' organisation to announce it would stop ferrying goods to US forces in Iraq.
"We confirm that a Turkish national has been assassinated," a Turkish embassy official in Baghdad told AFP.
A Turkish foreign ministry official identified the victim as Murat Yuce and said he had been kidnapped by the Tawhid wa al-Jihad (Unification and Holy War) group affiliated to the Jordanian-born Zarqawi.
She said Yuce was a cleaner working for the Bilintur catering company which subcontracted for a major holding company known as Tepe transporting goods to US soldiers in the northern Iraqi city of Mosul.
"The group made no demands concerning him," she added.
Another two Turks - Abdurrahman Demir and Sait Unurlu, both of them truck drivers - are still being held in Iraq by militants linked to Zarqawi who have threatened to execute them.
Their employers have said they may halt operations in Iraq in a bid to spare their lives.
A third driver, Tevfik Alkan, is also missing amid reports that he recently came under attack on a road between Baghdad and Tikrit.
A number of Turkish nationals have been kidnapped by extremists in Iraq but it is the first time one has been killed by his captors.
In the video posted on some websites a hostage who identifies himself as Yuce is seen blindfolded and being shot in the head by one of three hooded gunmen.
The masked man fired two more bullets into the victim's head after he fell to the ground, his face down in a pool of blood.
The video earlier showed Yuce reading a statement in Turkish urging Turkish firms to pull out of Iraq.
A statement read by one of the gunmen said the Turkish "apostate" would be executed because of Ankara's failure to heed calls to stop "aiding the (US) occupier" in Iraq.
The three gunmen were standing in front of a banner which appeared to carry the name of Zarqawi's group.
Istanbul-based International Transporters' Association (UND), which counts most of Turkey's 900 land transport companies among its members, said it had decided to stop transporting cargo to the US troops in Iraq from Monday.
Its executive committee chairman Cahit Soysal told AFP that the decision would affect about five percent of all trade between Turkey and its southern neighbour.
Hundreds of trucks pass daily between Iraq and Turkey, ferrying oil and goods, some of it destined for US forces in Iraq.
Dozens of foreigners working in Iraq have been abducted and taken hostage by Islamic militants waging an insurgency that began during the US-led occupation. Some have been set free, some remain missing and others have been killed.
A Turkish driver who died in Iraq after being attacked was buried in his home village in eastern Turkey on Monday while the body of another Turkish driver who had gone missing was found in a morgue in Baghdad and brought home.
Three other Turkish truckers were killed by unknown gunmen last month.
In early July, Iraqi insurgents with suspected links to al Qaeda released five Turkish workers whom they held hostage for several weeks.