A British hostage was killed during an attempted rescue mission in Nigeria, David Cameron said.
The effort to free Chris McManus, from the North West of England, and an Italian hostage was launched by Nigerian forces with the assistance of the UK.
The Prime Minister said the pair appeared to have died at the hands of their captors, either before or during the course of the rescue bid.
It was launched after the UK received credible information about their whereabouts and that their lives were under increasing threat, a spokeswoman said.
There have been a number of foreigners kidnapped while working in Nigeria in recent years.
In September 2008 two Britons were held by the Movement for the Emancipation of Niger Delta.
A Scottish oil worker was abducted and his guard killed in April 2009, in the Rivers State capital Port Harcourt.
Three Britons and a Colombian were kidnapped in January 2010 and in November of the same year, four men from the US, Canada and France were taken 7.5 miles offshore on the Okoro field.
In January last year two French hostages were kidnapped from Niamey, the capital of neighbouring Niger to Nigeria's north.