Syrian forces loyal to president Bashar al-Assad retook the town of Al-Qaraytan in eastern Homs province from ISIS on Saturday.
Soldiers found dozens of bodies who had been shot or stabbed.
According to the Syrian Observatory for Human Rights (SOHR), a UK-based monitoring organisation, up to 128 people were killed.
Director of the SOHR Rami Abdulrahman said: “After the regime retook it, the town’s residents found the bodies on the streets. They had been shot dead or executed with knives.
“Most of the ISIS fighters who attacked the town a month ago were in sleeper cells. They are from the town, know the town’s residents and who is for or against the regime.”
A resident and citizen journalist Abdullah Abdulkarim, who fled to the northern province of Aleppo a few years ago, said: “I knew most of these people — farmers and electricians and teachers.
“I know for a fact that most of the victims were not involved in anything against ISIS.
“Just 10 of them were collaborators with the regime, but this doesn’t justify executing them.
“Some of the bodies were dumped in wells, which makes it harder to find them.”
Mr Abdulkarim said the youngest victim was a teenager and the oldest was 57.
Several members of his extended family including five of his father’s cousins were also murdered.
He added: “They were all shot and left on the streets for others to take as an example.
“They all were accused of collaborating with the regime.”
Most appeared to have died in the two days before the Syrian forces took the town.
ISIS is now facing a total annihilation in its final Iraqi and Syrian strongholds.
It has lost its principle cities of Raqqa and Mosul as well as oil producing territory in eastern Syria.
Governments around the world now face a dilemma of how to deal with returning fighters who may potentially carry out ISIS inspired attacks at home.
A report from the Middle East-focused think tank, the Soufan Group, said the whereabouts of 35,000 foreigners who travelled to join ISIS is not known.
Many will have been killed or captured but others may try to return home.
Around 400 British citizens who joined ISIS may return home, including more than 100 women and 50 children.
The Syrian Democratic Forces is pushing eastwards into the desert province of Deir Ezzor after beating ISIS in its capital, Raqqa.