The decision was taken by the state cabinet at a meeting chaired by Chief Minister K Chandrasekhar Rao.
The cabinet also decided to increase the quota for the Scheduled Tribes (STs) from the current seven per cent to 10 per cent, official sources said.
Both the Houses of the state legislature will be meeting on Sunday for a special session to pass a bill for increasing the quantum of reservation for Muslims and STs in education and jobs.
Chandrasekhar Rao said Telangana was following the model of Tamil Nadu, where the overall quota for different groups is 69 per cent.
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