The accused were gunned down when they allegedly tried to snatch weapons from the police and escape. Police sources said they acted in self defence.
The incident occurred between 3 a.m. and 5 a.m. at Chatanpally near Shadnagar town, about 50 km from Hyderabad.
The accused were gunned down, about 400 meters away from a bridge under which the accused had dumped the victim's body and set it afire on the night of November 27 after the gang rape near Shamshabad on the outskirts of Hyderabad.
The accused were taken to the spot by the Cyberabad police for reconstruction of crime scene as part of the investigations.
The four accused killed in the encounter were: lorry drivers Mohammed Arif (26), Chintakunta Chennakeshavulu (20) and lorry cleaners Jollu Shiva (20) and Jollu Naveen (20). All hailed from Narayanpet district of Telangana.
Cyberabad Police Commissioner V. C. Sajjanar and other senior officials rushed to the 'encounter' scene.
As the news of the 'encounter' spread, people gathered near the scene, off the Hyderabad-Bengaluru national highway. They raised slogans hailing the police.
The accused had committed the crime after trapping the accused near a toll gate on Outer Ring Road (ORR) by deflating one of the tyres of her parked scooty. When the victim came to pick up her bike, the accused approached to help her but raped and killed her.
Charred body of the victim was found under the Chatanpally bridge.
The four were arrested by the police on November 29 and the next day a court in Shadnagar sent them to judicial custody for 14 days. They were subsequently shifted to the Cherlapally Jail in Hyderabad.
A court on Wednesday had remanded the accused to the police custody for seven days. The police believed to have taken them into custody on Thursday. This was done secretly as police was anticipating law and order problem due to possible protest by people.
Massive protest was held outside the Shadnagar police station on November 30 when the accused were about to be taken to the court. The protesters demanded that the accused be handed over to them. The magistrate had to be brought to the police station to send the accused into the custody.
The gruesome rape and murder had triggered nationwide rage with demands for immediate death penalty for the perpetrators. There have been protests all over the country. Many have demanded that the accused be hanged in public.
Speaking in Parliament, some MPs even called for lynching the perpetrators involved in the horrific crime.
Telangana government on December 4 had set up a fast-track court in Mahabubnagar for speedy trial of the case.
( With inputs from IANS )