About 3,000 armed policemen moved to the campus and swooped on the students on hunger strike to demand a Telangana state to be carved out of Andhra Pradesh.
Policemen, including paramilitary personnel, forcibly evacuated all hostels on the campus and took students into custody.
Deputy Commissioner of Police Sheikh Mohammed Iqbal said, "Prohibitory orders are in force and the assembly here is unlawful and hence we have arrested the students."
Police also arrested legislative council member Chukka Ramaiah when he tried to go to Osmania University.
Tension also prevailed at the high-security assembly building when activists of Akhil Bharatiya Vidyarthi Parishad (ABVP) tried to lay siege to the assembly and nearby council building.
Over 200 students reached the assembly and tried to barge in. Raising slogans of "Jai Telangana" they clashed with police at the main gate.
Senior officials ordered an inquiry to find out how the group could reach the assembly when policemen have been deployed on all the routes leading to the building.
Over 15,000 policemen from Andhra Pradesh and neighboring states have been deployed in Hyderabad to foil student plans to march to the assembly.