Prime Minister Imran Khan ordered action against the mob and any police who acted an onlookers to the killing.
“The lynching will be dealt with full severity of the law. We have zero tolerance for anyone taking the law into their own hands,” he said in a statement.
A government spokesman said more than 60 people suspected of involvement in the lynching have been arrested, adding that more suspects were being identified through social media videos shot by the villagers in Tulamba, Khanewal district.
The mob gathered at a mosque on Saturday night after the son of its prayer leader announced that he had spotted the man burning pages of the holy book, police official Munawar Hussain told Reuters.
Police arrived to find the man unconscious and tied to a tree, Hussain said, adding that the mob also attacked the police.
“The villagers armed with batons, axes and iron rods killed him and hanged his body from a tree,” Hussain said.
He said that evidence so far gathered by police suggested the dead man, identified as Muhammad Mushtaq, was in his 50s and appeared to have had mental disabilities.
Mob killings over accusations of blasphemy – a crime that can carry the death sentence – are fairly frequent in Muslim-majority Pakistan.
In December, factory workers in the eastern city of Sialkot lynched and burnt the body of a Sri Lankan in an attack that Khan said brought shame on the country.