Nearly 150 students have taken over the impoverished West African country's tiny embassy rooms in an apartment block in south Moscow.
The Guinea-Bissau government has reportedly agreed to pay the dues, but the students said they would continue to hold their envoy until the money reached their hands.
The students have been on hunger strike for three days and are refusing to feed ambassador Rogerio Herbert until they get 13 months of outstanding stipends.
"We have no money, so we couldn't eat even if we wanted to," said student Milena Silva.
"We had to take the ambassador hostage. It's a critical situation - there was nothing else we could do.
"We had to take the ambassador hostage. It's a critical situation - there was nothing else we could do"
Student Milena Silva
"The government has told us it would fax us a document confirming the transfer of four months' worth of money today and then the same tomorrow," said international relations student Seinabu Almeida, sipping her only sustenance - black tea.
"But we need to wait until we actually see the whole amount in our hands."
Guinea-Bissau, a former Portuguese colony, is one of the world's poorest countries. Per capita income was $140 in 2003.
The country's education minister urged the students to stay calm and leave the embassy.
"The government is committed to take responsibility for their studies," minister Marciano Silva Barbeiro said in Guinea-Bissau.
The students had not received their monthly $60 grant for 13 months.
The ambassador, who declined to comment, was taken hostage two years ago for similar reasons.
While the main goal is to recoup the outstanding cash, the students say their grants are a pittance. They say they need $150 a month to cover rent, food, transport and other costs.
Moscow was a major centre for students from the developing world during communist years, when the Soviet Union used free education to win friends and influence.
Tens of thousands of foreign students still study there.