Mohamed Mamdouh Qutb, the third most senior official at the Egyptian Embassy in Baghdad, was shown giving a hug to one of the kidnappers in the video.
One of the kidnappers was quoted as saying that they decided to free Qutb due to religious faith and moral qualities he possesses, adding his group has refused to accept a huge sum of money for Qutb's release.
Al-Jazeera TV channel reported last Friday that Qutb had been held hostage in Iraq, while airing a footage which showed Qutbsitting in front of six masked men in black.
The report said that the group claimed they seized the diplomat in revenge for Egyptian Prime Minister Ahmed Nazef's remarks that Egypt is ready to offer its security experience to the interim Iraqi government.
Egypt, in a swift reaction, has reaffirmed that it would not consider sending troops to Iraq.
On Saturday, Egypt urged those who kidnapped the Egyptian diplomat and a truck driver in Iraq to be merciful and set them free.
A militant group calling itself "Black Flags" said Wednesday that it had kidnapped six foreigners, including three Indians, two Kenyans and an Egyptian truck driver, identified as Mohammed AliSanad, in Iraq, threatening to behead them if the Kuwaiti firm for which they work does not pull out of the country.
The captors also demanded that India, Kenya and Egypt withdraw their personnel from Iraq, vowing to behead one hostage every three days if their demands are not met.
The announcement about the kidnapping came one day after militants released Filipino hostage Angelo de la Cruz after his country complied to the captors' demand and pulled its 51-membercontingent out of Iraq.
Last Monday, Alsayeid Mohammed Alsayeid Algarabawi, an Egyptian truck driver working for a Saudi company, was released by the so-called the Iraqi Legitimate Resistance after the company agreed to end its business in Iraq.
Another Egyptian driver, Victor Tawfiq Gerges, was released last month after being held hostage by militant groups in Iraq for more than two weeks.
Egypt has advised its citizens to stop seeking work in Iraq.