"The Islamic State executed a senior leader in the group of Syrian nationality, beheading him and hanging his body on a cross" in eastern Deir Ezzor province, it said.
The man was accused of "taking money from Muslims... And embezzling Islamic State funds", the Britain-based monitor added.
The group distributed a photograph of the decapitated man, whose name was given as Jalaybeeb Abu Muntather, hanging from an improvised cross.
A large handwritten document attached to him carried details of the judgment, which it said was handed down by the "commander of the faithful" -- the name used by IS for its leader Abu Bakr al-Baghdadi.
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The Observatory said the execution was announced via loudspeakers in areas under IS control, and that he would be buried in a Muslim cemetery despite having been executed.
IS jihadists regularly execute those accused of a variety of crimes, ranging from robbery and rape to violations of the group's harsh interpretation of Islamic law.
It controls much of Deir Ezzor, an oil-rich province in eastern Syria.