US Secretary of State John Kerry on Tuesday described the picture of an Australian boy holding a severed head in Syria as "stomach-turning" and said concerns about foreign jihadist fighters would be taken to the United Nations.

The image of the Sydney-raised boy posing with the rotting head of a soldier, posted on the Twitter account of his father Khaled Sharrouf -- an Australian who fled to Syria last year and is now an Islamic State fighter -- has sparked outrage.

Kerry said it underscored the brutality of the extremist militants who have swept across Iraq and Syria, seizing swathes of territory.

"This image -- perhaps even an iconic photograph -- is really one of the most disturbing, stomach-turning, grotesque photographs ever displayed," he said.

"A seven-year-old child holding a severed head, with pride and with the support and encouragement of the parent, with brothers there.

"This is utterly disgraceful and it underscores the degree to which ISIL is so far beyond the pale with respect to any standard by which we judge even terrorist groups that Al-Qaeda shunted them aside."

The Islamic State was previously known as ISIL.

Australia has an arrest warrant out for Sharrouf, who fled the country last year using his brother's passport after serving almost four years in prison. He had pleaded guilty over a 2005 conspiracy to attack Sydney.

Officials have said up to 150 Australians are fighting alongside militants overseas, mostly in Iraq and Syria.

Many other countries also have nationals in the war zones and there are growing concerns about the threat which jihadist foreign fighters will pose when they return home radicalised.

Kerry said the issue was so significant that the United States and Australia had agreed to take their concerns to the United Nations.

"We intend to join together in order to bring this to the United Nations meeting this month and put it on the agenda in a way that will elicit support from the source countries as well as those countries of concern."

He added that Australia and the US had agreed to "work together to assemble a compendium of the best practices in the world together regarding those foreign fighters".

- Grandfather in tears -

Australian Foreign Minister Julie Bishop said the jihadists' "barbaric ideology" could not be ignored.

"It's a shared issue across Australia, Indonesia, Malaysia, Philippines, Europe, in Pakistan, in Great Britain and Canada," she said.

"There are a number of countries across the globe reporting incidents of citizens becoming extremist fighters in the Middle East, and so this idea of having a forum, a discussion ... is something that I believe will be well-supported because so many countries are facing this threat."

Peter Nettleton, the grandfather of the seven-year-old boy holding the severed head, begged the government to help bring the boy and his siblings home.

"I'm scared for the children. What life are they going to have now?" the Sydney truck driver told Sydney's The Daily Telegraph.

"That (picture) brought me to tears because I don't know how to handle it," said Nettleton, who is estranged from his daughter Tara, Sharrouf's wife.

Another photo published by newspapers in Australia showed Sharrouf dressed in camouflage fatigues posing with three young boys believed to be his sons.

All were holding guns in front of the flag of the Islamic State.

Nettleton, whose daughter cut ties with him when she married and converted to Islam, said he thought his five grandchildren -- three boys and two girls -- were staying with Sharrouf's sister in Malaysia while he fought in Syria.

A friend of Sharrouf's, Mohamed Elomar, who is also a wanted man and is fighting in Syria, reacted to the photo of the boy with a tweet to "keep them heads rolling", the Telegraph reported.

"What a flaming ripper, ayyy beauty mate, love it, keep them heads rolling," it reportedly said.