''His hands were tied behind him and he had gunshot wounds.
There were signs of torture,'' a police source told Reuters.
Fox, 54, was abducted along with three fellow activists from the Chicago-based Christian Peacemaker Teams in November by a group calling itself the ''Swords of Truth''. The group had threatened to kill them if all Iraqi prisoners were not freed.
Fears about Fox's fate were raised earlier this week when al Jazeera television aired a video showing only fellow activists Briton Norman Kember and Canadians James Loney, and Harmeet Sooden.
US embassy spokeswoman Elizabeth Colton said Fox's body was on its way back to the United States. She had no comment on the nature of his death.
REUTERS DKS SP1351