Police were called to the junction of Elphick Road and Ship Street in Newhaven, at 11.30pm on Monday to reports of a stabbing.
The 18-year-old man died at the scene.
A 16-year-old boy was arrested at the scene on suspicion of murder and is currently in custody for interview and further enquiries.
A knife was recovered at the scene.
Nobody else was injured.
Detective Inspector Simon Dunn of the Surrey and Sussex Major Crime Team said: ‘This is a tragic incident and we are working to establish the full circumstances.
‘It is already clear that the victim and his alleged assailant are known to each other and we are not currently looking for anyone else suspected of having been involved in the attack itself.
‘We are keen to speak to anyone who was in the vicinity of Ship Street and Elphick Road in the late evening and who may have witnessed an altercation between two individuals.
‘Anyone who saw what happened, or who has any other information that they feel would help our enquiries is asked to contact us online or by calling 101, quoting Operation Tamworth.
‘The family of the victim are being supported by our specially trained officers.’
Lewes District Inspector Ed Ripley said: 'We are reassuring local residents that the investigation is contained to the location involved and that there is no danger to the wider community.
‘Our officers are in the area to advise and assist anyone who has particular concerns on learning of this matter, or who has any information they want to pass on.’