Otera Bibi, 42, had been living with her parents but wandered into a village in West Bengal, India, where she was tied to a tractor and beaten to death.
The baying mob pounced on Otera inside the wooden hut of local Dilip Ghosh amid fears she was attempting to snatch his ten-year-old daughter.
Villagers ripped off her clothes and shaved her head during a brutal three-hour assault during which she was pelted with stones.
Witnesses told as Otera was beaten "mercilessly" in the Mithipur-Panagarh village.
Otera is understood to have tried to protest her innocence but onlookers could not understand what she was saying.
Police arrived later in the afternoon and rushed Otera to Jangipur sub-divisional hospital but she died of her injuries after the attack in the Murshidabad district.
Murshidabad Superintendent of Police Mukesh said: "A mob beat up the woman after a rumour spread that she was trying to lift children from the village.
"We have started investigating the murder case. We are trying to identify the people involved in the lynching as well as those who spread the rumour."
Police detained several villagers for questioning but so far nobody has been charged over the death.
They believed Otera was a child kidnapper after a similar incident last month in which a child vanished from the neighbourhood.
But Otera's husband said his wife was "mentally challenged" while her family said they were not concerned at first when she went missing because she would often wander away from home for a day or two.
Otera's death marks the latest in a string of mob lynchings reported in India in recent months.
In May, four Sikh men were beaten by a angry mob who wrongly accused them of sexually assaulting women.
The men had been visiting a village in Northern India collecting donations when they were set upon and brutally attacked
And last November, a 45-year-old woman was brutally beaten and left unconscious by a vigilante mob of up to 25 men who believed she was guilty of killing her husband.
Usha Devi was dragged out of her home in front of her children before she was attacked in front of nearly 100 bystanders with no one stepping forward to help her.
Her village suspected her guilty of killing her husband Ashok Paswan, 50, following a domestic violence incident.