Rodolfo Boligao was captured in May by the Abu Sayyaf, an Al-Qaeda-linked group in the Southern Philippines that has gained international notoriety for bombings and kidnapping sprees.
Boligao's handcuffed remains were found yesterday evening, with his severed head placed by his side, said Chief Inspector Walter Anayo, police chief of Maimbung town where the body was recovered.
A piece of paper with the victim's name written on it was placed on top of the body, Anayo said.
"The body was intentionally left in the middle of the road so that people could find it," he said.
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Abu Sayyaf bandits seized Boligao along with two members of the coast guard from the port city of Dapitan, some 250 kilometres from Jolo in May and demanded an unspecified ransom amount.
The government rejected the ransom demand and the fate of the coast guard members is unknown.
Jolo island on the country's southwestern tip is a known hideout of the Abu Sayyaf, a loose band of several hundred armed men that was founded in the 1990s with seed money from the Al-Qaeda.
It is currently holding at least seven hostages, according to the military.
The group has also been blamed for the worst terror attacks in the country, including the firebombing of a ferry off Manila bay in 2004 that killed over 100 people.