Police on the southern island of Mindanao recovered the decapitated corpses of the two men yesterday, nine days after they were taken, said the police chief of Lanao del Sur province.
"Salvador Hanobas and Jemark Hanobas were beheaded by their abductors," Senior Superintendent Rustom Duran told reporters by telephone. "Locals brought the heads and the torsos to the mayor's office."
It was unclear if the two victims were related. Duran said the kidnappers belonged to an Islamic militant group that battled government forces for a week in February, leaving three soldiers dead and forcing 20,000 people to flee their homes.
Police found black flags identical to those flown by Islamic State jihadists in Iraq and Syria in the fighters' hideout in the remote Mindanao town of Butig. Duran said the group had also abducted six workers at a local sawmill on April 4, accusing them of being military informers.
Four were freed unharmed on Monday. A Muslim separatist insurgency has raged for more than four decades in the southern Philippines, leaving more than 120,000 people dead.
Efforts to secure a peace deal with the largest rebel group, the Moro Islamic Liberation Front (MILF), collapsed after parliament failed to pass a law to create an autonomous Muslim region in Mindanao.
MILF leaders have warned the collapse of the peace deal could embolden hardline militants who want to resume a violent separatist uprising. News of the beheadings came after the Abu Sayyaf, another Islamic militant group, released a retired Italian priest held hostage for six months last week.
A major firefight broke out afterwards on the remote southern island of Basilan on Friday, leaving 18 soldiers and more than two dozen Abu Sayyaf gunmen dead.
The military said skirmishes were still continuing with Abu Sayyaf fighters on Wednesday, and the toll of dead rebels had risen to 28.
Among those killed were a Moroccan bomb expert called Mohammad Khattab, who the military said had been sent to build ties between local Muslim rebel groups and an international jihadist network.
"Khattab planned to speak to all of them to unite and link them to the entire international terrorist network," military spokesman Brigadier-General Restituto Padilla told reporters.