Police were called to a unit on the Great Western Highway in Kingswood, a suburb of Penrith, just before 2pm today.
A 21-year-old woman was found with “significant injuries including two stab wounds to her chest”, police said.
Officers and paramedics administered first aid and tried to revive her but she could not be saved.
Police said the apartment was a sharehouse and other people were home at the time of the alleged stabbing, one of whom called police.
A man, 22, was allegedly seen running from the scene.
About 7.10pm he was arrested on Derby Street, Penrith, without incident, police said.
He was taken to Penrith Police Station and was assisting police with inquiries.
His arrest comes after an hours-long manhunt.
”He is wanted in relation to her death,” Detective Superintendent Trent King said earlier.
“We do know who he is, however at this stage the investigation is very early on.
“We are very keen to speak to this person and we want to do it as soon as possible.”
King also said neither the victim nor the man were known to police, nor had they been involved in any violent or domestic-related criminal matters.