The graphic video shows three prisoners, dressed in Guatanamo Bay- style orange overalls, being beheaded by three masked Islamic State fighters.
As well as the beheadings, the propaganda video shows a Syrian suicide bomber blowing himself up in a lorry at a Kurdish checkpoint. Supposed aerial footage of the town from a drone also features at the beginning of the video.
Islamic State fighters are also seen wandering through the seemingly deserted town and posing near the burnt-out remains of a Kurdish tank.
Whilst the video suggests that the extremist group have captured the town, Sinjar remains a contested battle site between Islamic State and Kurdish militia groups.
Located about 120km from the city of Mosul, which is held by Islamic State, Sinjar is an important strategic town linking Mosul with other Islamic State-controlled areas in neighbouring Syria.
Islamic State has been trying to capture the mountainous region since launching a large offensive in the summer. Thousands of members from the religious minority Yazidi community fled from the region with many seeking refuge on Mount Sinjar.
Recently Peshmerga officials have claimed that Kurdish soldiers have made significant ground in Sinjar, successfully delivering aid to the Yazidi minority.
The Sinjar operation is part of a larger plan to isolate Mosul from other regions and to attack Islamic State militants from all directions.