Solution 1:

StuartLC beat me to it. :(

The word for mercy killing is euthanasia.

Usage:

The veterinary team could not heal the dog; it had to be euthanized.

Many religious people take issue with euthanasia as being no different than any other form of murder.

Solution 2:

In addition to the already mentioned euthanasia another phrase (not a single word) that is used, most often in the context of war, is Coup de grâce from the French "blow of mercy".