Wallace had traveled to Los Angeles in February 1997 to promote his upcoming second studio album, Life After Death, and to film the music video for its lead single, 'Hypnotize.' The East Coast rapper was venturing into West Coast territory during one of hip-hop's most volatile periods. Just six months earlier, Tupac Shakur had been gunned down in a Las Vegas drive-by shooting, and the East Coast-West Coast feud showed no signs of cooling. On March 5, Wallace gave a radio interview to The Dog House on San Francisco's KYLD, admitting he had hired security because he feared for his safety. Two days later, he presented an award to Toni Braxton at the Soul Train Music Awards and was booed by parts of the audience. He was supposed to fly to London the next morning. Instead, he stayed for one more party.

The Petersen Automotive Museum sits on Wilshire Boulevard in the Carthay Circle neighborhood, its distinctive red facade now a Los Angeles landmark. That night, the museum's parking garage had filled with SUVs carrying hip-hop's elite. When the fire marshal shut down the party due to overcrowding, the Bad Boy Records entourage formed a caravan. Wallace rode with his associates Damion 'D-Roc' Butler, Junior M.A.F.I.A. member Lil' Cease, and driver Gregory 'G-Money' Young. Sean Combs followed in another vehicle. As they waited at a red light just 50 yards from the museum, a dark-colored Impala pulled alongside Wallace's Suburban. The driver, described as a Black male wearing a light blue suit and bow tie, lowered his window, drew a 9mm pistol, and fired six shots. Four bullets struck Wallace. He was pronounced dead at 1:15 AM.

The investigation has spawned what the New York Times called 'a cottage industry of criminal speculation.' Early reports linked the murder to Shakur's killing and the East Coast-West Coast rivalry. Los Angeles Times journalists Chuck Philips and Matt Lait reported that police suspected a Southside Crips member acting on personal financial motives. Retired LAPD detective Greg Kading later alleged that Death Row Records head Suge Knight orchestrated the hit through Mob Piru gang member Wardell 'Poochie' Fouse, who was himself killed in a 2003 motorcycle shooting in Compton. Other theories have implicated corrupt LAPD officers connected to the Rampart scandal. Books, documentaries, and films continue to explore the case, most recently 50 Cent's 2025 Netflix documentary series Sean Combs: The Reckoning.

Wallace's mother, Voletta Wallace, spent decades fighting for answers. In 2002, she filed a wrongful death claim against the city of Los Angeles, alleging the LAPD had sufficient evidence to arrest the gunman but failed to act. The lawsuit named two officers connected to the Rampart police corruption scandal. In 2005, a mistrial was declared after new evidence emerged. The case was refiled and ultimately dismissed in 2010, described by the New York Times as 'one of the longest running and most contentious celebrity cases in history.' Voletta died on February 21, 2025, never seeing her son's killer brought to justice. The case remains officially unsolved. The rapper Nas once said that the deaths of Wallace and Shakur were 'nearly the end of rap' - a generation of talent silenced on the streets of two American cities.