Police say the 16-year-old boy entered a smoke shop on the Lower East Side and got into an argument with a store employee.
The store employee then chased the teen and stabbed him in front of 161 Orchard Street.
They say the suspect then fled from the scene, while the victim ran away before collapsing in front of the Duane Reade at 100 Delancey Street.
The victim was taken to Bellevue Hospital, where he is now in stable condition. He is expected to survive.
The suspect was taken into custody at 101 Stanton Street.
He was identified by police as 27-year-old Fernando Reyes, who is charged with one count of assault and one count of criminal possession of a weapon.