The Pentagon has confirmed that the four Marines in the video have returned to their home base at Camp Lejeune, North Carolina, and investigators have identified and interviewed at least two of them.
Officials said the act appears to violate international laws of warfare and the Marines will likely face criminal charges.
The Taliban called the act "shameful" and Afghan president Hamid Karzai called it "completely inhumane."
Secretary of State Hillary Clinton said the appropriate punishment will be handed down.
"It is absolutely inconsistent with American values, with the standards of behavior that we expect from our military personnel," said Clinton.
Defense Secretary Leon Panetta said the incident could tarnish the reputation of the entire military.
While the Taliban found the images "shocking," it's leaders said the incident won't affect ongoing peace talks with the U.S.