The hostages – from Italy, Britain, Greece and Lebanon – were captured in a raid on a construction site in the northern state of Bauchi.
In an online statement posted on Saturday, the militant group Ansaru said it had killed the captives.
Ansaru is suspected of being an offshoot of the Boko Haram network.
On Sunday, UK Foreign Secretary William Hague said a British construction worker, named as Brendan Vaughan, was “likely to have been killed at the hands of his captors, along with six other foreign nationals”.
“This is an unforgivable act of pure, cold-blooded murder, for which there can be no excuse or justification,” he added.
The Italian government issued a similar statement, while the Greek foreign ministry said: “The information we have shows that the Greek citizen is dead.”
Ansaru’s online message included grainy pictures purporting to show the bodies of the seven – a Briton, an Italian, a Greek and four Lebanese workers.
The group said they had been killed because of a rescue attempt by British and Nigerian forces.
But in its statement, the Italian foreign ministry said: “There was never any military attempt to rescue the hostages by any of the governments concerned.”
It added that the group’s actions “can have no explanation other than blind and barbaric violence”.
Britain’s military said its warplanes which were recently spotted in Nigeria’s capital Abuja had been there to carry soldiers taking part in the French-led operation in Mali – not to rescue hostages.
The seven hostages were seized in a raid from a site belonging to the Setraco construction company. It resulted in the death of a guard.
Ansaru said it had carried out the attack in revenge for what it called atrocities by European nations against Islam.
The group, formed in January 2012, has been listed by the UK government as a “terrorist organisation” aligned with al-Qaeda in the Islamic Maghreb.
It abducted French national Francis Colump in December in an attack on a compound in the northern state of Katsina.
In January Ansaru said it had carried out an attack that killed two Nigerian soldiers as they prepared to deploy to Mali, where French-led troops have been fighting Islamic militants.