Ewold Horn, a wildlife photographer, was shot dead as he attempted to flee his captors during a raid by army troops on Friday.
Six militants from the Isis-linked Abu Sayyaf group (ASG) were also killed during the 90-minute firefight in the jungle island town of Patikul in Sulu province, the country’s military said.
Mr Horn, 59, was abducted, along with a Swiss friend and a Filipino companion, while on a birdwatching trip in the region in 2012.
The other two men both later escaped but Mr Horn had remained a hostage ever since.
Speaking about his death, Brigadier General Divino Rey Pabayo, commander of the forces which attempted the rescue, said: “We are angered by the ASG’s utter disregard for human rights that they would rather murder Mr Ewold Horn than let him be recovered by government forces.”
He added that his troops had “tried our very best to safely rescue him from his captors” and added that his task force had suffered casualties themselves.
Also killed during the clash on Friday was Mingayan Sahiron, the wife of Radullan Sahiron, a senior leader of the Abu Sayyaf group who is on the US government’s most wanted list with a $1m [£795,000] reward for his capture.
He came to Washington’s attention in 2001 after helping to orchestrate the kidnapping of American tourists.
Abu Sayyaf is a small but violent group in the Muslim south of the largely Catholic Philippines. It has been blacklisted as a terrorist organisation by both Washington and Manila because of its use of extortion, kidnappings, beheadings and bombings.
It has pledged allegiance to Isis militants in Iraq and Syria.
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