The man was left with fatal stab wounds following an argument on Saturday afternoon in Tullinge in southern Stockholm. He was rushed to hospital but his life could not be saved.
"It was a traffic incident which spiralled out of control," said Ull-Britt Öhman at Södertörn police to the TT news agency.
According to a report in the Aftonbladet daily the 21-year-old had fallen out with a 51-year-old man over who had the right of way at a road junction in a residential neighbourhood.
The newspaper reported that a source close to the police investigation has indicated that the older man had ignored the give way right rule which is an accepted praxis on Swedish roads, driving in front of the 21-year-old's car. The younger man then proceeded to hit his horn and the two men stopped their cars and faced up to each other.
The pair then started brawling in the street.
"A witness has said that it was over in a couple of seconds," said the source to Aftonbladet.
The 51-year-old man then fled the scene as the 21-year-old lay bleeding on the ground. He later called the police and turned himself in and is now being held on suspicion of murder.
Interviews were conducted with the suspect on Saturday evening and he has been remanded into custody.
The two men are not thought to have had any previous relation to each other and neither have any prior criminal record.