The incident took place in the early hours of Sunday morning close to the 'Sommar' nightclub in the centre of the city. He was rushed to the Karolinska University Hospital where he succumbed to his injuries.
"There was some kind of fight which ended up with one person being stabbed," Fredrik Nylén of the Norrmalm police told the Expressen newspaper.
Police have arrested a man, also in his 20s, at the scene and he is being held on suspicion of murder. A knife was later confiscated.
An eyewitness told the Aftonbladet newspaper that the situation was "insane" as security guards tried to save the man's life.
Police sources said they believed that the trouble began at the club and then spilled outside. They have declined to elaborate on whether the victim was known to the man who was subsequently arrested.
"There are a number of assumptions but I do not want to give any details until we have carried out all the questioning of those involved," added Fredrik Nylén.
A number of witnesses have since been questioned by police and further witnesses will be heard today. A forensic examination of the crime scene was carried out during the morning and an investigation has begun.