The question -- once you understand that $E=m$ (see [a] for a correct proof) -- is equivalent to asking "How does energy transform from the rest frame of the body to a moving frame?"
Consider the standard set-up in which $E=m$ is proven -- a body at rest gives out two flashes of light in opposite directions, then you analyse the frame from a relatively moving reference frame. In this frame, one of the beams' energy transforms as $\sqrt {\frac{{1 + v}}{{1 - v}}} \frac{E}{2}$ and the other transforms as $\sqrt {\frac{{1 - v}}{{1 + v}}} \frac{E}{2}$. By energy conservation, the energy lost -- and thus the mass reduction -- must equal the total of these quantities, which is $\gamma E$, as required.
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My original answer -- which you can see the comments are relevant to -- considered a bizarre approach where you write $m=m_0+\frac12m_0v^2$, then keep replacing the $m_0$ with the expansion for $m$ i.e. $m=m_0+\frac12mv^2$, which leads to $m=m_0/(1-v^2/2)$, which is wrong. But the approach is arbitrary, it is pretending that kinetic energy transforms as $\mathrm{KE}\to\gamma\,\mathrm{KE}$ (it doesn't, this is wrong), for no good reason.