Muhammad Atif, who was enrolled at the Qari Latif Madrassa at Vihari in Punjab, was allegedly beaten up by his teacher, Qari Ziauddin, who then tied his feet to a ceiling fan hook.
The boy died after being hung upside down for some time.
Prime Minister Yousuf Raza Gilani has expressed sorrow and concern over the incident and ordered an inquiry.
Atif's mother and grandmother noticed torture marks on his body and said his fellow students had told them that he had been locked up in a room.
Atif's body has been sent for autopsy, police official Muhammad Akram Niazi said, adding police was trying to nab Ziauddin.