The killings, which have shocked many in the predominantly Christian country, were condemned by Pope Francis and UN Secretary General Ban Ki-moon.
The victims were planning to go to Europe by boat from Libya but were captured and then killed by the Islamic extremists, said grieving family members and government officials. Ethiopia's government on Monday declared three days of mourning.
Pope Francis on Monday sent a letter to the patriarch of Ethiopian Tewahedo Orthodox Church, Abuna Matthias, expressing "distress and sadness" at the "further shocking violence perpetrated against innocent Christians in Libya.
UN Secretary-General Ban Ki-moon condemned the killings and "utterly deplores the targeting of people on the basis of their religious affiliation," his spokesman said.
The UN Security Council condemned "the heinous and cowardly apparent murder" of more than 30 Ethiopian Christians and stressed again that the Islamic State group "must be defeated and that the intolerance, violence and hatred it espouses must be stamped out".
The council demanded the immediate release of all hostages held by the extremist group and called for those responsible for the "reprehensible acts of terrorism" to be brought to justice.
Some people gathered Monday gathered in an Addis Ababa slum to mourn two former residents whose faces were recognized in the Islamic State video. The 29-minute video, released on Sunday via social media accounts and websites used by the extremists, shows many Ethiopian Christians held captive in Libya being shot or beheaded by militants.
Eyasu Yikunoamlak and Balcha Belete left Ethiopia two months ago with the aim of reaching Europe. They are believed to have left Ethiopia through Sudan and later traveled to Libya where they planned to take a boat to Europe but they were seized by Islamic State militants, relatives told The Associated Press on Monday.
Relatives and friends of the two victims in Cherkos Village, a poor neighborhood of the Ethiopian capital, said Eyasu and Balcha grew up together and used to live in the same house.
Seyoum Yikunoamlak, the older brother of Eyasu, said he first learned about the death of his younger brother on Sunday evening while checking the news on Facebook.
"I was very worried how to tell our family but everyone is a Facebook user these days so people in our village told our family that Eyasu was among the group that are on the (Islamic State) video," a tearful Seyoum said.
Family members stopped getting calls from Eyasu a month ago and grew worried, but news of a violent death was never expected, he said.
"His dream was to go to Italy and then reach the UK and help himself and his family members," he said.
Redwan Hussein, an Ethiopian government spokesman, said on Sunday he believed the victims were Ethiopian migrants trying to reach Europe, an account bolstered by local residents who said impoverished young men are tempted to make the perilous journey to Europe.
"There is no job opportunity here. I will try my luck too, but not through Libya," said Meshesa Mitiku, a longtime friend of the two victims. "I want to move out. There is no chance to improve yourself here. This is the whole community's opinion."
Ethiopia's three days of mourning start Tuesday, when lawmakers will meet to discuss the killings and consider the country's possible response, the government said in a statement.
Ethiopia has angered Islamic extremists over its military's attacks on neighboring Somalia, whose population is almost entirely Muslim. A militant in the video said "Muslim blood that was shed under the hands of your religion is not cheap," but the video did not specifically mention the Ethiopian government's actions.
The Islamic State video showing the killing of the Ethiopians starts with what it called a history of Christian-Muslim relations, followed by scenes of militants destroying churches, graves and icons. A masked fighter brandishing a pistol delivers a long statement, saying Christians must convert to Islam or pay a special tax prescribed by the Quran.
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