A Krishna (32) and K Ramana (26), the deceased, were residents of Gorlepalem in Butchaiahpeta mandal.
Kothakota police inspector H Maleswara Rao said the two were friends and involved in marijuana trade.
But later they fell out. On one occasion Krishna beat up Ramana and the latter had filed a complaint against him at Butchaiahpeta police station a few weeks ago.
Krishna intercepted an auto-rickshaw in which Ramana was travelling last night. After a heated argument, Krishna stabbed Ramana twice, the inspector said. The rickshaw driver tried to rescue Ramana before fleeing from the spot.
Later the police found bodies of both of them.
Though police were clear that Ramana died at Krishna's hands, they have yet to ascertain how Krishna died. Investigation is on.