Police believe the video may have been posted by an accomplice of Merah.
French President Nicolas Sarkozy had issued a public plea for the video material not to be aired.
Mr Sarkozy welcomed al-Jazeera's decision and pledged to do all he could to block the transmission of the video should any other media outlet attempt to show it.
Commenting on its decision, the Qatar-based al-Jazeera said: "The Paris bureau received a video from an anonymous source [on Monday] entitled Al-Qaeda Attaque la France [Al-Qaeda Attacks France] that appears to show the recent killings in Toulouse and Montauban.
"Given its contents, we immediately passed the video on to the French police as we were duty-bound to do and they are conducting their investigation.
"In accordance with al-Jazeera's code of ethics, given the video does not add any information that is not already in the public domain, its news channels will not be broadcasting any of its contents."
Al-Jazeera said it had received numerous requests from media outlets for copies of the video but had rejected them.
Victims' cries A USB memory stick containing the footage, sent along with a note claiming the attacks in the name al-Qaeda, was posted last Wednesday, when Merah, 23, was already under siege.
It was posted from "outside Toulouse", a police source told Agence France-Presse.
The BBC's Christian Fraser in Paris says investigators will now try to work out whether Merah passed on the footage via the internet or in person.
Earlier, al-Jazeera Paris bureau chief Zied Tarrouche confirmed he had watched the video and it showed all of the killings in chronological order.
The videos had been re-edited and mixed with music and recitals of Koranic verse.
"You hear the voice of the person who carried out the killings," Mr Tarrouche told French channel BFM TV.
"You also hear the victims' cries. My feelings are those of any human being who sees horrible things."
Mr Tarrouche said he had to weigh up the "risks and the consequences" of airing the video, but he added: "We are not a sensational network."
Mr Sarkozy, in an address to magistrates and police officers who took part in the Merah case, had urged media not to show the footage.
"I ask of those in charge of all the TV channels in possession of these images not to broadcast the images under any pretext out of respect for the victims and out of respect for the republic," he said.
Relatives of the dead echoed his plea.
The mother of Imad Ibn Ziaten, the first of three paratroopers killed by Merah, told AFP: "My son was killed, a 30-year-old child and people want to show it as if it were a film. Please, I can't see that."
There is no suggestion any other outlets have the footage.
Merah's brother Abdelkader has been charged with helping him steal the powerful Yamaha scooter used in the killings, and police are seeking a third person over the theft of the scooter.
Meanwhile, Merah's Algeria-based father has been sharply criticised for saying he wants to sue France over his son's death.
Mohamed Benalel Merah has said he wants to bury his son, who reportedly had joint French and Algerian citizenship, in Algeria.
His accusation that the French authorities deliberately chose to kill his son rather than capture him has caused indignation in Paris.
"If I were the father of such a monster, I would shut my mouth in shame," said French Foreign Minister Alain Juppe.