American journalist Luke Somers was killed by the Al Qaeda affiliate in Yemen during a rescue attempt by the United States on Saturday. South African hostage Pierre Korkie was also reportedly killed during the rescue mission.
US Secretary of Defence Chuck Hagel confirmed the death of Somers. President Barack Obama offered condolences to Somers' family.
While Yemen's Defence Ministry had said that the American hostage was freed in an early morning rescue operation, which left 10 militants dead, US officials and Somers' sister said that he had been killed.
Lucy Somers, the journalist's sister, said the family was informed by FBI agents that Somers had been killed, The Associated Press reported.
A US official told The New York Times that Somers had been shot by the militants during the rescue attempt and though he was rescued by US commandos who flew him to a US naval ship, he succumbed to his injuries soon after.
Reports said that 10 Al Qaeda militants had been killed in a drone strike in fresh US operations to rescue hostages from the Shabwa province.
England-born Somers was kidnapped by the Islamist militants last year. He could not be rescued in a recent US operation that freed eight other hostages, Pentagon had admitted.
Al Qaeda's Yemen affiliate had released a video on Wednesday threatening to kill Somers if the American government did not heed their 'demands'. Somers' family had sent out a plea urging the outfit to spare the 33-year-old's life.
"We ask that all of Luke's family members be allowed to mourn in peace," Somers' sister said after news of his death.
