Rao told NDTV news channel that people from Andhra Pradesh were welcome to live in the city after the creation of Telangana.
He rejected making Hyderabad a joint capital, like Chandigarh.
"When people from other parts of India can comfortably live in Hyderabad, then why not people from Andhra?" Rao asked.
"Hyderabad is such a place ... such a good society. It allows everybody, absorbs everybody," said Rao, who fast-unto-death forced the Indian government to announce it was ready to move to form a Telangana state.
"In Hyderabad, not just Andhras, but Maharashtrians, Kannadigas and Kayasths from north India live."
He accused the Andhra Pradesh people of "exploiting" the employment opportunities of Telangana region.
"Ultimately our people were pushed to go to the Gulf countries. The agony of Telangana is that 35,000 Telanganas are in jails in Gulf countries," Rao said.
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