A brawl broke out at the crowded carnival ride area of the showground about 8pm on Monday night, NSW Police said.
The 17-year-old suffered a critical stab wound to the chest and died while being taken to Westmead Hospital.
NSW Ambulance Inspector Mark Whittaker said the teen was in cardiac arrest with a traumatic chest wound when paramedics arrived.
"Paramedics performed CPR and a number of other critical interventions at the scene before loading the patient for transport to Westmead Hospital," he said in a statement.
"Unfortunately despite best efforts, he couldn't be resuscitated.
"There's no doubt this would have been a very confronting scene for the dozens of witnesses who were out to enjoy an evening at the Royal Easter Show."
A second teen, 16, was stabbed in the leg and was taken to Westmead Hospital in a serious but stable condition.
A 15-year-old boy was arrested and taken to Auburn Police Station.
Show visitors were moved out of the area which was packed with people and is now closed, while a crime scene has been established.
The Royal Agricultural Society of NSW said it was shocked and saddened by the teenager's death and the "adult carnival" rides area would remain closed throughout Tuesday.
"The RAS does not tolerate or condone any violence or anti-social behaviour and joins with NSW Police and the wider community in condemning this appalling behaviour and unnecessary loss of life."
Meanwhile, SafeWork NSW is investigating if the Free Fall ride should be closed for the remainder of the show after a four-year-old child was left unrestrained while the ride was in operation.
A photograph on social media showed the boy sitting on the ride without a harness when it was in mid-air, while three other children on the ride were restrained.
Fair Trading Minister Eleni Petinos said she had a zero-tolerance approach towards any operator who failed to provide the highest possible safety standards.
"I can confirm that I have instructed SafeWork NSW to explore shutting the Free Fall ride for the remainder of the 2022 Sydney Royal Easter Show if patrons' safety cannot be guaranteed," Ms Petinos said.
"The ride has been closed pending investigation."
SafeWork NSW Inspectors will continue to be a presence for the remainder of the show.
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