"I'm outraged by the news that a Canadian citizen, John Ridsdel, held hostage in the Philippines since September 21, 2015, has been killed at the hands of his captors," Trudeau said.
"This was an act of cold blooded murder and responsibility rests with the terrorist group who took him hostage."
Ridsdel, fellow Canadian tourist Robert Hall, Norwegian resort manager Kjartan Sekkingstad and Filipina Marites Flor were kidnapped seven months ago from yachts at a marina near the major city of Davao, more than 500 kilometers (300 miles) from Jolo.
Six weeks after the abduction, Abu Sayyaf gunmen released a video on social media of their hostages held in a jungle setting demanding one billion pesos ($21 million) each for the safe release of the three foreigners.
The men were forced to beg on camera for their lives, and similar videos were posted over several months in which the hostages looked increasingly frail.
In the most recent video, Ridsdel, a retiree aged in his late 60s, said he would be killed on April 25th if a ransom of 300 million pesos was not paid.
Hours after the ransom deadline passed, police in the Philippines said two people on a motorbike dropped the head near city hall on Jolo, a mostly lawless island about 1,000 kilometers south of Manila that is one of the main strongholds of the Abu Sayyaf militant group.
"We found a head in a plastic bag," provincial police chief Wilfredo Cayat told AFP.
He said the head belonged to a caucasian man, but emphasized it was impossible to immediately identify. The local police chief issued a report to journalists with similar details.
Trudeau said Canada was working with the government of the Philippines to pursue and prosecute Ridsdel's killers, and that efforts were underway to obtain the release of the other hostages.
The Abu Sayyaf is also believed to be holding a Dutch bird watcher kidnapped in 2012, and has been blamed for abducting 18 Indonesian and Malaysian sailors from tugboats near the southern Philippines over the past month.
The Abu Sayyaf is a small group of Islamic militants listed by the United States as a terrorist organization that operates from Jolo and nearby islands.
It is a radical offshoot of a Muslim separatist insurgency in the south of the mainly Catholic Philippines that has claimed more than 100,000 lives since the 1970s.
It is blamed for the nation's worst terror attacks, including the bombing of a ferry in Manila Bay in 2004 that killed more than 100 people, as well as the kidnappings of dozens of foreigners in the southern Philippines and across to Malaysian Borneo.
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The Abu Sayyaf's leaders have recently declared allegiance to the Isis jihadists who are causing carnage in the Middle East and have carried out deadly attacks in Europe.
However, analysts say the Abu Sayyaf is mainly focused on lucrative kidnappings for ransom, rather than waging an ideological war or creating a violent Islamic caliphate.
From 2002-2014, the US deployed special forces advisers to train and provide intelligence to Filipino troops, which led to the killing or arrest of many Abu Sayyaf leaders.
However after the US forces pulled out, the Abu Sayyaf launched a series of increasingly bold kidnapping raids, as well as deadly battles with Filipino troops that show it remains a major threat in the south.
The recent kidnapping spree prompted Indonesian Security Minister Luhut Panjaitan to warn the region was in danger of becoming a "new Somalia", in reference to pirates operating from the African nation that have bedevilled international shipping in nearby waters.