Mexico's attorney general said the testimony of two arrested members of a drug gang had led them to the site.
He said police officers had confessed to handing the students over to the drugs gang in southern Guerrero state.
The disappearance has shocked Mexico and has sparked nationwide demonstrations.
Earlier this month, another mass grave was found, but DNA tests suggest the bodies were not those of the students.
|Frustration is growing with the failure to find out what happened on 26 September|
Arrest warrants have been issued for the mayor of the town of Iguala, where the abductions took place, his wife and the police chief, all of whom are on the run from the authorities.
The mayor, Jose Luis Abarca, allegedly ordered police to intercept the students to prevent them from interrupting a speech his wife was giving in Iguala.
Eyewitnesses say they saw the students being bundled into police cars after the police shot at buses carrying the students, killing three of them and three other people in nearby vehicles.
|Relatives of the 43 missing students attend a mass at the same place where |
three students were killed on 26 September
Relatives have gathered and held vigils for the missing students
|Mexico's Attorney General Jesus Murillo Karam leaves a news conference|
in Mexico City (27 October 2014)
Karam is under pressure to bring those responsible to justice
He said that they had admitted to "having received a large group of people" on the night of 26 September, when the 43 students were last seen.
"We have the people who carried out the abduction of these individuals," Mr Murillo Karam told reporters.
He said the other two suspects detained on Monday apparently worked as lookouts for the gang. The suspects have not so far been identified.
The four men arrested are all believed to be members of the group behind the abductions, called Guerreros Unidos (United Warriors).