In it, one of the masked attackers says in classic Arabic, "This is for our brothers of Hajin", the source, who said they had seen the video, told ABC News.
The killing of Louisa Vesterager Jespersen, 24, from Denmark and Maren Ueland, 28, from Norway, has damaged Morocco's reputation as a relatively stable country, free of the terrorist threats to tourists elsewhere in the region.
Friends of Ms Jespersen's family have been pleading with social media users not to watch the footage, which is still available online.
Investigations by Morocco's Central Bureau for Judicial Investigation also showed that the video was made last week before the killing of the two women.
One body was found inside a tent by French hikers and the other just outside.
A national security official who asked not to be named because he wasn't authorized to speak to the media said the three had knives and slingshots when they were arrested.
"Witnesses saw the group at night as they were heading to the camp area". "It makes me angry, but encouraged me that we must never give in and give up".
Police in Morocco also published a photograph that, according to The Sun, shows items in the men's possession at the time of their arrest.
The three alleged perpetrators were taken into custody on Thursday morning in Marrakesh.
Ueland had taken safety precautions before making the trip, her mother Irene Ueland told Norwegian broadcaster NRK.
The women's bodies were found on Monday in the Atlas Mountains, an area prized by hikers.More news: New Office app is a launch pad for your documents
More news: E-cigarette usage nearly doubles in U.S. high-schools
More news: IPL auction: Chakravarthy, Unadkat emerge most expensive buys at Rs 8.40 crore
They were on a month-long backpacking adventure in Morocco when the killers struck. "The men were not from round here".
The killings were "politically motivated and thus an act of terror", Danish Prime Minister Lars Loekke Rasmussen said, without identifying the potential motives.
Louisa Vesterager Jespersen, 24, from Denmark was murdered in the Atlas Mountains.
Norway's Prime Minister Erna Solberg condemned what she called a "brutal and meaningless attack on innocents".
Morocco's general prosecutor said on Wednesday that a suspect arrested in main tourist hub Marrakech was a member of a militant group, but did not name the organisation. Danish intelligence services at first said they had authenticated the video but later backtracked, saying it was still being "examined".
He told aftenposten.no that he thought the group of men may have been inspired by ISIS or radicalised through the web.
"The video and preliminary investigation according to the Moroccan authorities indicate that the killings may be related to the terrorist organization Islamic State", the Danish intelligence service declared in a statement, Reuters reports.
In it the suspects had threatened to carry out attacks, he added. The women were on a Hiking tour and had pitched for the night in your tent.
The Daily Mail said an anti-terrorism rally is planned for Saturday in Morocco's capital, Marrakesh.
Morocco is generally considered safe for tourists and is a key ally of the United States and Europe in the fight against terrorism.
Maren's mother paid tribute to her daughter by sharing a picture of her on Facebook with her pet dog, a huge leonberger named Alf Herman.