The incident took place last night at Nallapadu where the bodies of M Saidu Babu (23) and Krishna Jaa (22) were found, they said.
Both the engineering students, who died on the spot, were charred, police said.
A letter recovered from Saidu's shirt revealed his plan to kill his classmate and lover Krishna, whose fidelity he doubted, police said.
Their bodies have been sent for post-mortem examination and further investigations are on.