Hundreds gathered at Butler University on Sunday to celebrate the life of Peter Kassig, the American aid worker killed by Islamic State militants earlier this month.

Passages from both the Bible and the Qur'an were read out, reflecting Kassig's conversion to Islam after being taken captive in October 2013. He changed his name to Abdul-Rahman before his death, which was publicised in an ISIS propaganda video on November 16.

Kassig briefly studied Political Science at the Indiana-based university before moving to the Middle East. Formerly an Army Ranger in Iraq, he founded his own relief organisation, Special Emergency Response and Assistance (SERA), to deliver aid in areas of conflict.

"We're not here because of how he passed," executive director of the Islamic Society of North America in Plainfield, Hazem Bata, said at the ceremony on Sunday. "We're because of how he lived. We're here because of the type of man he chose to be. We're here because of his selflessness."

"Our hearts broke with the news not only of his death, but the brutal and barbaric way in which it occurred," said Rev Bill Hoopes, who leads Epworth United Methodist Church which the Kassig family attends.

"Many of us had hoped deeply that Peter would be the exception. That he would be the one his captors would be set free."

Kasisg's parents, Ed and Paula, had pleaded with their son's captors prior to his death.

"We are so very proud of you and the work you have done to bring humanitarian aid to the Syrian people...Our hearts ache for you to be granted your freedom so that we can hug you again and then set you free to continue the life you have chosen, the life of service to those in greatest need," Paula said in a videotaped address to Kassig in October.

"We implore those who are holding you to show mercy, and use their power to let you go."

In a letter received by his parents on June 2, Kassig said his situation had been "complicated", likely by his conversion to the faith of his captors.

"In terms of my faith, I pray every day and am not angry about my situation in that sense. I am in a dogmatically complicated situation here, but I am at peace with my belief," he wrote.

"If I do die, I figure that at least you and I can seek refuge and comfort in knowing that I went out as a result of trying to alleviate suffering and helping those in need."

In a statement released November 17, Kassig's parents asked for prayer, and said they will learn to forgive their son's killers.

"'In 26 years, he has witnessed and experienced first-hand more of the harsh realities of life than most of us can imagine," Paula Kassig said.

"But rather than letting the darkness overwhelm him, he has chosen to believe in the good – in himself and in others. Peter's life is evidence that he's been right all along – one person can make a difference."

"Our hearts are battered, but they will mend. The world is broken, but it will be healed in the end. And good will prevail as the One God of many names will prevail," Paula added.

Ed urged people to continue praying for those suffering under ISIS' regime. "Please pray for Abdul-Rahman, or Pete if that is how you knew him, at sunset this evening. Pray also for all people held against their will in Syria, Iraq, and around the world," he said.

"Lastly, please allow our family the time and privacy to mourn, cry – and yes, forgive – and begin to heal."