They say Robert Hall (pictured left) was beheaded by Islamic militants from Abu Sayyaf in Sulu province and the partial remains of a body were found outside a Roman Catholic church in the town of Jolo.
Mr Hall was among four people abducted from a marina on Samal Island last September.
Another member of the group, forming-mining executive John Ridsdel (pictured right), was beheaded in April.
Mr Hall's death came after a £4.5 million ransom was not paid and it has been condemned by the country's presidential office as a "the brutal and senseless murder".
Herminio Coloma, a spokesman from The Philippine's president, said: "This latest heinous crime serves to strengthen our government's resolve to put an end to this reign of terror and banditry."
Canada's Prime Minister Justin Trudeau said the country's government was working to confirm the death with Philippine authorities but said "we have every reason to believe that the reports are unfortunately true."
Please read my statement on Robert Hall: https://t.co/b1nEdyIDH9
— Justin Trudeau (@JustinTrudeau) June 13, 2016
He added: "The government of Canada will not and cannot pay ransoms for hostages to terrorist groups, as doing so would endanger the lives of more Canadians.
"We are more committed than ever to working with the government of the Philippines and international partners to pursue those responsible for these heinous acts and bring them to justice, however long it takes."
Mr Hall was kidnapped by Abu Sayyaf, a seperatist Islamist extremist group, which the US government says is trying to create an independence Islamic state in western Mindanao and the Sulu Archipelago.
Two other hostages, Norwegian Kjartan Sekkingstad and Filipino woman Marites Flor, remain captives of Abu Sayyaf.
In the first of two Abu Sayyaf videos posted online prior to his death, Mr Hall pleaded for Canadian and Philippine officials to undertake negotiations with his captors.
Speaking in a second video, he said: "I would also like to thank my family for the effort they put in - my family and friends for the effort they put in - to get me out of here.
"I know you did everything you can, and I truly appreciate it. I'm sorry I got you in this mess."