The four, who gathered around 5.47 AM at the Beichen Overpass near the National Stadium or Bird's Nest, were whisked away by the Chinese policy after a couple of them clambered up two electricity poles to display the banners with slogans, "One world One Dream Free Tibet" and "Tibet will be free".
The Beijing 2008 Olympics slogan is "One World One Dream."
The banner "One World One Dream Free Tibet" was written in large black letters, police said after they rushed to the scene 12 minutes later and took the foreigners away for investigation, official Xinhua news agency reported.
The four, identified as British citizens, have entered China with tourist visas, police said.
China has been bracing for pro-Tibet protests which had marred the Olympics torch relay in London and Paris after the most violent protests in two decades erupted in Lhasa in March, rattling the Communist leadership.
China's Olympic organisers condemned the protest saying they firmly oppose any attempt to politicise the Games and asked foreigners to respect Chinese laws.
"Four foreigners gathered illegally and we express our strong opposition to that. We firmly oppose any attempt to politicise the Olympic Games," Sun Weide, a spokesman for the Beijing Olympic organising committee, told reporters.
Protests spearheaded by monks had turned violent and spread to some other Tibetan inhabited areas with 20 people killed in Lhasa riots, which China blamed on Tibetan spiritual leader the Dalai Lama, living in exile in India since the 1959 failed uprising against Chinese rule.
China had accused the Dalai Lama of having orchestrated the violence but the Tibetan monk has vehemently denied any role in the riots and said he supported the Beijing Olympics.
Under pressure from the West, the envoys of the Dalai Lama and Chinese representatives have held two rounds of fence-mending talks in recent months but made no headway.
China recently said it has set aside designated parks for holding protests with prior approval during Olympics.
The International Olympic Committee (IOC) Charter prohibits demonstrations of "political, religious or racial propaganda" in any Olympic sites, venues or areas.
Protests are also considered a threat to social stability and order by the Communist party ruled China.
Asked whether foreign athletes would be allowed to demonstrate their political views through non-violent means at the opening ceremony, a senior security official recently emphasised the Olympic Charter.
"People participating in the Olympic Games, including athletes and coaches, should observe the regulations of the International Olympic Committee," Liu Shaowu, Director of the Beijing Organising Committee for the Olympic Games (BOCOG) security department said. He, however, said Beijing had designated several parks for protests.
"During the Olympics, in order to ensure a smooth traffic, nice environment and good social order, we would like to ask protesters to go to the designated parks," the official had said. Olympic Games, in the past, have also seen designated "protest pens".