It is not clear when the video was shot but confirms that it was shot in the town of Sirte.
However, this is not the first time that the terror organisation's flag has been spotted in Libya. Earlier, an al-Qaeda flag was seen over a courthouse in Benghazi.
"These brigades have no relation whatsoever with al Qaeda. There are no al-Qaeda elements in Libya," said Ibrahim Dabbashi, Libyan ambassador to the United Nations.
"What you may have here is simply a fundamentalist brigade parade, which is troubling, but [that] doesn't necessarily make this a column of al-Qaeda fighters," the official said. "What you also may have is some militias smearing other militias with the al Qaeda-linked tag," said a US official.