Violence broke out in Tarnaka near the campus as students, who wanted to carry the body in a procession to Gun Park near the state assembly, clashed with the police.
As they were prevented from taking out a procession, the students threw stones at police personnel, who retaliated by firing teargas shells.
Police also resorted to baton charge near English and Foreign Languages University (EFLU) and a B.Ed. college on the campus to disperse the protesting students.
Amid tight security, the police later shifted the body of V. Santosh to an ambulance and sent it to his native village in Adilabad district, around 300 kilometres from Hyderabad.
Frustrated over the delay in the formation of a separate Telangana state, Santosh committed suicide, leading to the tension.
Santosh, a degree student of a college in the city, hung himself from a tree in front of the Arts College in Osmania University, which has been witnessing violent protests for three years over the statehood issue.
The student resorted to the extreme step on Tuesday night. He left behind a suicide note, blaming "ruling classes" for creating hurdles in the formation of a Telangana state.
Telangana Joint Action Committee (JAC) convener M. Kodandaram visited the campus to pay tributes to Santosh and appealed to the students not to sacrifice their lives.
Osmania University students' Joint Action committee called for a shutdown of all educational institutions in Telangana.
The university postponed all examinations scheduled for on Wednesday and Thursday.
Over 600 people, mostly youth, have committed suicide in the last three years demanding a separate Telangana state.