At around 1:40pm local time, emergency services were called to a house on the Great Western Highway in Kingswood following reports of a stabbing.

A 21-year-old woman was found with two stab wounds to her chest, Xinhua news agency reported.

Paramedics treated the injured woman, but she was later pronounced dead at the scene.

Authorities are working to formally confirm the victim's identity.

Following the stabbing incident, New South Wales Police Force officers were informed that a 22-year-old man was seen running away from the scene of the incident.

They established a crime scene and began investigating the circumstances surrounding the stabbing.

At around 7:10 pm local time, officers arrested the man who fled on Derby Street in Penrith.

“He has been taken to Penrith Police Station and is assisting with enquiries,” police said in their latest update.

Before the man was taken into custody, Detective Superintendent Trent King, of Nepean Police Area Command, told local media that he was wanted in connection with the woman's death.

The man, who was believed to be in a domestic relationship with the victim, "is the alleged perpetrator of this incident and is the person who caused the injuries," King said.

With over 10,000 people living in the suburb, Kingswood is located 50 km west of Sydney's central business district.