Zabair Hussain, 41, was discovered with multiple injuries to his head and body in Staniforth Road, Darnall, Sheffield, at about 23:20 GMT. He later died at the scene.
The 28-year-old arrested man has been taken into police custody.
Officers believe a number of men were involved in an assault and have appealed for witnesses to come forward.
Det Ch Insp Steve Handley, from South Yorkshire Police, said: "We are still in the very early stages of the investigation and we're carrying out numerous enquiries to get to the bottom of what happened - from reviewing CCTV footage to speaking to potential witnesses.
"While I understand that incidents like this are worrying for those living locally, we have increased patrols by neighbourhood officers to reassure residents."

Toby Ricketts and Marianna Fenn tied the "noodle knot" in the New Zealand South Island town of Akaroa.
The happy couple say that guidelines of the Pastafarian religion stipulate that wedding celebrants must be pirates.
Members of the church profess the belief that the world was created by an airborne spaghetti and meatballs-based being and humans evolved from pirates.
New Zealand officials last month designated the religion as an officially-recognised faith, allowing Wellington-based Pastafarian Karen Martyn the legal right to conduct marriages.
She carried out her inaugural wedding as an ordained "ministeroni" on Saturday.
More weddings are planned, she said, including same-sex unions that were legalised in New Zealand in 2013.
"I've had people from Russia, from Germany, from Denmark, from all over  contacting me and wanting me to marry them in the church because of our  non-discriminatory philosophy," she said.
"We will marry any consenting legal adults who meet the legal requirement."

Labour MP for Bassetlaw, John Mann, a Leave campaigner, said people voted to leave because of immigration, zero-hour contracts and job prospects and said a "divide in Britain" had been exposed.
Mansfield voted most strongly to leave, with 70.9% backing Brexit.
Rushcliffe, which includes the towns of West Bridgford and Bingham, was the only area to vote for Remain.
It saw the East Midland's highest turnout.
Meanwhile, the turnout in Nottingham was the fifth lowest in the UK at 61.8%.
Leave won by a tiny margin of just over 2,000 votes in the city.
Mr Mann said his party was "somewhat out of touch".
"With the middle classes largely voting remain because they see it as benefiting them and the working classes largely voting to leave because it dis-benefits them - that's the divide in Britain," he said.
Latest reaction and updates from Nottinghamshire
Like large parts of England, Nottinghamshire overwhelmingly voted to leave the European Union.
The margin of victory in Bassetlaw, Ashfield and Mansfield was huge, with less than a third of people voting remain.
Arguably the biggest surprise came in Nottingham, which narrowly backed Brexit.
Affluent Rushcliffe was the only area to vote Remain.
Overall Nottinghamshire voted 57.9% for Leave and 42.1% for Remain.
Conservative Anna Soubry, the MP for Broxtowe and a Remain campaigner, tweeted it was "a dreadful decision".
"People like me were told you're scaremongering, we don't want to listen to the experts," she said.
"All that has been unfortunately proved to be accurate. We have made a very, very, very bad mistake."
Labour MP for Nottingham North, Graham Allen, said David Cameron had "gambled with Britain's future" by calling for a referendum, saying people voted to leave "in protest" at the current government.
Turnout was 81.5% in Rushcliffe - the highest in the East Midlands and the only council area to vote Remain.
The vote was close elsewhere, including in Nottingham, where the split was 50.8% Leave, 49.2% Remain.
Alice, a caller to BBC Radio Nottingham from the Carrington area of the city, said she felt "frightened of the future".
"It potentially gives a mandate for a lot of prejudice against people who have immigrated here, whether from the EU or elsewhere," she said.
A man has been arrested on suspicion of murder after another man's body was found in a street on New Year's Eve.
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The light-hearted Church of the Flying Spaghetti Monster has staged its first legally recognised wedding.
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All but one council area of Nottinghamshire, including Nottingham city, has voted to leave the EU.