Aljazeera on Thursday broadcast pictures of Santoro's passport and showed him sitting bound and blindfolded in a ditch with a gun to his head. In separate footage, four masked and armed men were shown reading a statement.
Quoting a statement from the "Islamic Movement of Iraqi Mujahidin", Aljazeera said Santoro had been killed after the group had found evidence that he supported the Americans.
In Rome, the ANSA news agency earlier reported, citing Italian intelligence sources, that Santoro, 52, from the southern Campania region near Naples, had been taken captive.
The Italian foreign ministry said an Iraqi photographer had been shown a passport and body that could be Santoro's.
But Italian Foreign Minister Gianfranco Fini said "everything should be treated with the utmost caution".
Santoro also appears blindfolded
and bound, with a gun to his head
"There are still many obscure aspects and for this reason we have to use the conditional," said the foreign minister in a televised interview via telephone.
A group of people took the photographer to Ramadi, in western Iraq, "where they showed him the body of a man and a passport.
"The document was in the name of Salvatore Santoro, born in Naples on the 10th of January 1952, an Italian citizen who had lived for several years in Britain", the minister added.
The corpse's face was covered in the pictures taken by the photographer so that no clear comparison could be made with the passport photo, Fini said.
The foreign ministry had received no confirmation of the capture of an Italian in Iraq.
"There are still many obscure aspects and for this reason we have to use the conditional"
Italian foreign minister
Italy has some 3,000 troops stationed in Iraq, and has been one of the staunchest supporters of the US-led invasion.
Seven Italians have been taken captive in Iraq since the beginning of the year. Two, including journalist Enzo Baldoni and a businessman of Iraqi origin, have been killed.
The others, including two women aid workers, have been released.
A total of more than 150 foreigners have been seized in Iraq since April. More than 30 of them have been killed by their captors.