The man being assaulted has special needs, police say. His assailants can be heard making derogatory statements against white people and President-elect Donald Trump.
In one part of the video they use a knife to remove part of his scalp.
Chicago police have described the video as a "sickening" possible hate crime.
"It makes you wonder what would make individuals treat somebody like that," Chicago Police Superintendent Eddie Johnson said in a press conference streamed on Twitter.
"I've been a cop for 28 years, and I've seen things that you shouldn't see in a lifetime, but it still amazes me how you still see things that you just shouldn't."
Police say the unnamed white victim is an acquaintance of one of the attackers and may have been kidnapped for up to 48 hours prior to the assault.
They say he has been released from hospital after being traumatised by the attack.
In the press conference senior police officers paid tribute to the speedy response of officers in rescuing the stricken man.
In the 30-minute video, the attackers can be seen cutting the 18-year-old victim's clothes, dropping cigarette ash on him, pushing his head back with a foot and drawing blood by cutting off some of his hair with a knife.
Several people can be seen laughing and smoking as the attack takes place.
Police Commander Kevin Duffin said the police would investigate whether a hate crime had taken place.
"They're young adults, and they make stupid decisions," he said, and, in reference to the language used, investigators would seek to "determine whether or not this is sincere or just stupid ranting and raving", he said.
Analysis - James Cook, BBC North America Correspondent
What is perhaps most striking about the video — apart from the awful, casual brutality — is how brazen it is.
This was a live broadcast to the world which showed a group of people drinking, smoking and laughing while their bound and gagged captive cowered, petrified, in the corner of the room.
In other videos posted online the young man is beaten, made to drink from a toilet bowl and forced at knife-point to say "I love black people."
It is shocking but in truth gangland violence is far from uncommon in Chicago which recorded 762 murders last year, more than in the larger cities of New York and Los Angeles combined.
In speeches and tweets Donald Trump has made much of the crime and racial division in the city where President Barack Obama worked as an activist and a senator.
The incoming president now faces the much tougher challenge of turning damning words into useful actions.
The incident happened on Tuesday, police say, in a flat on Chicago's West Side. Police say they found the victim wandering in the streets in a disorientated and distressed state after the assault.
Later they say they responded to reports of an assault close to where he was discovered and uncovered evidence of violence and damage to property.
Police say the victim was a high-risk missing person and two men and two women are now in custody.
In June a Chicago man was shot dead while live-streaming a video of himself on Facebook.