The defeat late last night meant the Indian colts not only failed to qualify for the final round of the AFC U-22 championship, but also lost out on a place in next year's Asian Cup.
India finished their campaign with seven points from five matches, while Oman have 10 points from as many games.
After a barren opening half, Hamood Saleh scored the first goal for Oman in the 54th minute followed by strikes from Faed Ibrahim (67th minute), Saleh Hadid (75th) and Mubarak Humaid (89th).
After dominating the proceedings in the opening 45 minutes, the Indians lost the plot in the second half.
If it was all India in the opening half, the first 20 minutes of the second half went to Oman.
India, however, started the match on a bright note and slowly started the build up after absorbing the initial pressure.
A Lalrindika Ralte freekick from striking zone struck the wall and Manandeep Singh's powerful left footer was punched out by rival goalkeeper Mazin Masud in the 21st minute.
Manandeep again broke free in the 30th minute and ran inside the box but Oman goalkeeper Masud once again managed to keep the Indian forward at bay.