The incident occurred at Peddavagu lake near Battupalli in Kagaznagar mandal when a group of four students from Kagaznagar town had gone to the lake for swimming.
Expert divers have joined the search for the missing students.
While Junaid Ali did not step into the water, three others, who did not know swimming, went into the lake.
Junaid Ali alerted the villagers, who then informed the police.
The missing students have been identified as Ibrahim Ali, 24, an engineering student, Khaleel Khursheed, 19, and Aziz Khursheed, 18, students of 12th and 11th standard respectively.