The South Korean Ministry of Information and Communication said on Thursday the ban followed reports that a video showing the beheading of Kim Sun-Il, 33, by suspected al-Qaida operatives was circulating on the internet.
"We have asked local Internet service providers to block the possible spread of footage showing Kim's beheading," a ministry official said.
He said the government would punish any internet users who spread the online footage after tracking down their internet protocol addresses.
The ministry closed a local website showing images of the killing late on Wednesday, Yonhap news agency said.
Kim, a translator for a South Korean company supplying US troops with food and equipment, was killed by masked men who identified themselves as members of the Tawhid wa al-Jihad (Unification and Holy War) group. His body was later found dumped on the road west of Baghdad.
A video showing Kim before the killing was aired by Aljazeera. The channel did not broadcast the gruesome scene of the beheading saying it could cause anguish to viewers.
The victim's family has demanded the government locate and bring back the video, which contains the beheading and Kim's last words.
The captors, led by alleged al-Qaida operative Abu Mussab al-Zarqawi, is blamed by Washington for a long list of attacks in Iraq since the fall of Saddam Hussein.