The 17-year-old victim was found with stab injuries in a white Ford Focus which crashed in Heath Street, between Smethwick and Winson Green, at around 4.20pm on Saturday.
He was taken to hospital but pronounced dead around an hour later.
The car is believed to have crashed around five to 10 minutes after the boy was stabbed around a mile away at a convenience store in Warley.
Witnesses said the boy was chased into the Nowa Polka Polish convenience store in Waterloo Road and stabbed in the neck with a knife.
Other people are thought to have been in the Focus with him and fled the scene when the car crashed.
Police identified a suspect and just before 2am on Sunday arrested an 18-year-old man from a property in Smethwick. He remained in police custody on Sunday afternoon.
A friend of the shop owner said: "My friend owns the shop, two lads came in and stabbed him in the neck."
The incident is the latest of several violent attacks in the area, coming only a week after a teenager was rushed to hospital with potentially serious injuries after a stabbing in nearby Lightwoods Park, off Hagley Road West.
Meanwhile on March 31 two men were injured in a shooting in Poplar Road, Bearwood.
Elaine Greene, who runs Beauty Box Hair Salon in Waterloo Road, said: "We didn't hear a thing at the time – I even locked up at around 4.45pm and never saw anything happening.
"It's so very sad. It was so shocking to hear and very sad for the poor boy. And also the poor shop owner where it took place.
"He could have ran into my shop as I'm only two doors away, it's scary.
"Last week my daughter was at Lightwoods Park with her little boy and saw the stabbing there, it made her really bad. Now there's this stabbing – she just said you are hopeless to help.
"My heart goes out to this young boy's family. It's your worst nightmare."
One Smethwick resident, who wished to remain anonymous, added: "It is extremely sad to hear what has happened. I heard he was chased into a shop in Waterloo Road and stabbed.
"Then he was taken in a car to hospital, but it crashed on the way to hospital – and he later died."
While another said: "It is just too close to home."
Photos from the scene showed forensic officers scouring Waterloo Road looking for evidence.
Detective Inspector Hannah Whitehouse from West Midlands Police's homicide unit, said: “This is a tragic loss of a young life and my thoughts are with the boy’s family who are clearly devastated at what’s happened.
“We understand the victim was stabbed in Waterloo Road but then transported in a white Ford Focus that crashed in Heath Street. Several people fled the scene of the collision and we are working hard to try and identify everyone involved.
“My officers worked through the night and this morning to seize CCTV, speak to witnesses and gather intelligence. And that led us to the address in Smethwick where a suspect was arrested.
“I really need to hear from any witnesses who saw the victim being chased in Waterloo Road or him and the attacker leaving that location, plus anyone who saw the collision in Heath Street and what happened afterwards.
“If anyone captured video on phones or dash-cam then I would also urge them to get in touch as they could have vital information.”
Soho and Victoria Councillor Mohammed Rouf, who represents the area where the stabbing took place, said: "It is terrible that this has happened on our streets – taking someone's life away is terrible. It is really sad news and this should not be happening.
"I really condone this and it's really sad news today. It is someone's life at the end of the day, it's terrible it should not have happened."
Warley MP John Spellar said: "In the West Midlands and across the country there has been a rise in stabbings and it is deeply concerning.
More photos from the scene:
"As a result in cuts in police numbers the gangs are allowed to take over control of our streets. While extra police officers coming through are welcome, we still need to get us back to the position where the police are controlling the streets. The chief constable and Home Secretary need to take urgent action."
Anyone with information is urged to call West Midlands Police on 101, quoting crime reference number 20/549867/21.
Alternatively, contact Crimestoppers anonymously on 0800 555111 or at crimestoppers-uk.org