Jagjeet Singh, who was a clerk at the Hatch Food and Gas convenience store, came to the US 18 months ago and stayed with his sister and brother-in-law in Modesto.
Mr Singh, who hailed from Punjab's Kapurthala city, reportedly had an altercation with one of the customers who came to buy cigarettes on Friday, FOX40 reported.
Another clerk at the store Sukhwinder Singh, describing the events that led to the fatal encounter, said the outburst began apparently over being asked for an ID and Jagjeet Singh had refused to sell cigarettes to the unidentified person as he did not show any proper ID.
The man then reportedly left the store in a hurry, mouthing racist abuses and warning him of dire consequences. The entire sequence was captured by a CCTV camera installed in the store premises.
The customer then returned angry, 30 minutes later, and took Jagjeet Singh's life when he was about to close the store, Singh said.
He was soon rushed to the hospital where he struggled for his life for nine hours before finally succumbing to his injuries, the report said.
Yesterday, External Affairs Minister Sushma Swaraj spoke to Indian ambassador in the US Navtej S Sarna in the wake reports of killing of a Sikh man in a suspected hate crime in that country.
Modesto police are yet to determine the motive behind the attack and there is no official word about the killer.
"Paramedics responded because an employee had collapsed and they thought this to be a medical issue," said Officer Eric Schuller with Modesto police to Fox40. "When they arrived on scene they found that this employee has actually been stabbed."
"It's just a very sad situation what happened to him because nobody deserves that over something so small," Rodriguez said.
Friends at the store say he was a husband and father who had only been on the payroll in California for one month "in hopes of supporting his family back in India."
Meanwhile, Rights group The Sikh Coalition said it has urged the Modesto Police Department to leave no stone unturned in their investigation into the killing, including examining the possibility of this being a hate crime.
This was the third such incident involving killing of Indian-origin people in California since Wednesday night in two separate incidents.
On Wednesday night, Indian-origin Naren Prabhu, a Silicon Valley technology executive and his wife, were shot at their home in San Jose by their daughter's ex-boyfriend who was eventually shot dead in a standoff with the police.
Mirza Tatlic, 24, fatally shot the couple in an apparent revenge attack.
On Thursday, A 32-year-old doctor, Ramesh Kumar, has been shot dead under mysterious circumstances in a car in the US state of Michigan.