Conor Taaffe told the public inquiry into the black teenager's death that he and his wife, Louise, knelt down beside him after he was stabbed. Mrs Taaffe held Stephen's head in her hands and spoke into his ear, telling him: "You are loved, you are loved."
Neville Lawrence, Stephen's father, left the room during Mr Taaffe's evidence and several people in the public gallery wept.
Stephen, 18, was attacked by a white gang in Eltham, south-east London, five years ago as he and his friend, Duwayne Brooks, waited for a late- night bus home.
The public inquiry, chaired by Sir William Macpherson of Cluny, has been told of crucial delays and errors by police who investigated the racially- motivated murder.
Mr Taaffe said that he and his wife prayed for Stephen and stroked his head in the final moments of his life. When he arrived home, he said, he washed some of the teenager's blood from his hands and poured the water under a rose bush in his garden. "I thought that, in some ways, perhaps he is living on," he said.
The couple were walking home from a prayer meeting at a church when they saw Stephen and Duwayne running in the other direction. At first, they thought they might be muggers, Mr Taaffe, 32, an advertising manager, told the inquiry.
"At the time, I did sense immediately something wrong, something dangerous," he said. "You just know." They then saw Stephen stumble, clutch his body and collapse to the ground. Mr Taaffe said that his wife told him: "Conor, this is serious."
Duwayne, who was trying to flag down traffic and was extremely agitated, told them that Stephen had been attacked. "I saw blood on the ground," Mr Taafe said. "It was thick, congealed blood, quite a lot of it.
"I was praying in a whisper: 'Bless him Lord Jesus, keep him Lord Jesus, have mercy on him'." At one point, he said, Stephen involuntarily moved his head and sounded "as if he was choking, trying to breathe".
Mr Taaffe described how his wife spoke into Stephen's ear. "Both of us knew that the hearing was one of the last things to go, and she said: 'You are loved, you are loved'."
When police arrived, he said, Constable Linda Bethel put a finger in front of Stephen's mouth and said that she thought he was still breathing. "I tried, and felt nothing," he said.
Mr Taaffe said he was aware of other racist attacks in the area. "Every time I see a black person in Eltham, I just feel sorry for them," he said.
Five white youths were accused of Stephen's murder, but charges against two of them were dropped before the case came to court. The other three were acquitted in 1996.
The inquiry continues today.