The 17-year-old was taken to hospital but pronounced dead around an hour later.
The 18-year-old, from a property in Smethwick, was arrested shortly before 2am on Sunday morning. He remains in police custody.
Detective Inspector Hannah Whitehouse, from West Midlands Police Homicide Unit, said that several people fled the scene of the crash and that police are working to identify everyone involved.
Officer Whitehouse added: “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.
“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.”
West Midlands Police are asking those with information to call them on 101 or contact them via their website, quoting the crime reference 20/549867/21.