Tybalt died in the streets of Verona after a fight with Romeo (stagings usually depict that Tybalt is killed in a sword fight, but Shakespeare's directions simply read, "They fight. Tybalt falls."), who sought revenge because Tybalt killed Romeo's friend Mercutio. Tybalt previously challenged Romeo over what Tybalt perceived to be an insult when he overheard Romeo at Lord Capulet's party.
In Act III, Scene 1, Tybalt and the Capulet men come upon Mercutio and Benvolio in the street and ask about Romeo. Mercutio, who obviously doesn't like Tybalt, becomes difficult and avoids the question. Benvolio, afraid of a fight, warns the men to get out of the streets because the Prince decreed that men caught fighting would be put to death. Romeo soon enters the scene and, when insulted by Tybalt, backs down, arguing Tybalt doesn't really know him. Romeo even claims he loves Tybalt, having just married Juliet, Tybalt's cousin:
Tybalt, the reason that I have to love thee
Doth much excuse the appertaining rage
To such a greeting. Villain am I none.
Therefore farewell. I see thou knowest me not.
Not satisfied, Tybalt presses the issue and urges Romeo to fight. All the while, Mercutio is becoming enraged at his friend's acquiescence and draws his sword on Tybalt. Despite Romeo's pleas that they stop, Mercutio and Tybalt continue and Mercutio is stabbed. Tybalt initially runs away from the scene, allowing Mercutio to play out his death with choice words as he characteristically makes a joke, but then ends up cursing the Montagues and Capulets: "A plague o’ both your houses!"
After Mercutio's last gasp, Tybalt inexplicably returns to the scene and is immediately challenged by the emotional Romeo, who has labeled himself "effeminate." Romeo promptly seeks to affirm his manhood by fighting and killing Tybalt, who was obviously foolish (and also a tool in Shakespeare's plot) to return to the scene of the crime.