While the ruling Telangana Rashtra Samithi (TRS), the opposition Congress and other parties celebrated the occasion as Merger Day, the Bharatiya Janata Party (BJP) commemorated it as 'Telangana Liberation Day'.
It was on this day in 1948 that then princely state of Hyderabad merged with the Indian union following "police action", as the Indian military operation against Nizam's army is popularly called.
The celebrations at Telangana Bhavan, the TRS headquarters, were led by party working President and Minister K. T. Rama Rao. He hoisted the national flag and garlanded the statues of 'Telugu Talli' and Telangana ideologue Professor Jayashankar.
Ministers Mehmood Ali, Malla Reddy, Srinivas Goud, MPs, state legislators and other leaders participated in the programme.
"Sept 17th: The day Hyderabad was merged with Indian Union - Remembering the countless sacrfices & saluting the martyrs," Rama Rao later tweeted.
BJP celebrated 'Telangana Liberation Day' across the state with its leaders hoisting the national flag. They also took out 'tiranga ralliesa' and demanded that the day be celebrated officially.
Union Minister for Parliamentary Affairs Prahlad Joshi unfurled the national flag at the BJP state headquarters in Hyderabad.
Union Minister of State for Home G. Kishan Reddy, former Maharashtra Governor Vidyasagar Rao, state BJP chief K. Laxman and other leaders attended the programme.
Speaking on the occasion, Laxman alleged that the TRS government is not celebrating the day officially under pressure from its ally All India Majlis-e-Ittehadul Muslimeen (AIMIM).
Laxman claimed that Chief Minister K. Chandrashekhar Rao had promised to celebrate the day officially during the Telangana movement but went back on his word after coming to power.
Kishan Reddy said the TRS government was scared of AIMIM and demanded that the history of Telangana's liberation be included in text books so that the future generations know about the sacrifices made by their forefathers.
The Central ministers and BJP leaders are scheduled to address a public meeting at Patancheru near Hyderabad later in the day.
Telangana Merger Day was also celebrated at Gandhi Bhavan, the state headquarters of the Congress party. State Congress chief Uttam Kumar Reddy unfurled the national flag.
He said that Hyderabad merged with India thanks to the efforts of Jawaharlal Nehru and Sardar Vallabhbhai Patel. He claimed that the Congress and the Communists fought against the Nizam, who wanted to join Pakistan.
The Congress leader said the fight against the Nizam had nothing to do with religion but by linking it with the religion, the BJP was trying to distort history.
The day was also celebrated at the Telugu Desam Party (TDP) office. Party leader Ravula Chandrashekhar Reddy hoisted the tricolor at NTR Trust Bhavan.
BJP has been demanding for last two decades that the day should be officially celebrated like in some districts of Maharashtra and Karnataka, which were part of Hyderabad State.
Like the previous governments in undivided Andhra Pradesh, the TRS government in Telangana has rejected demands for officially celebrating the day. TRS leaders accused BJP of indulging in "divisive politics".
Muslim groups have been opposing any celebrations as they say that Muslims were massacred during the "police action".
AIMIM maintains that there is only one Independence Day for the entire country and hence there is no need for separate celebrations in Telangana.
( With inputs from IANS )