Qiu Chengwei, 41, stabbed competitor Zhu Caoyuan repeatedly in the chest after he was told Zhu had sold his "dragon saber," used in the"Legend of Mir 3," the newspaper said a Shanghai court was told Tuesday.
"Legend of Mir 3" features heroes and villains, sorcerers and warriors, many of whom wield enormous swords.
Qiu and a friend jointly won their weapon last February, and lent it to Zhu who then sold it for 7,200 yuan (US$870), the newspaper said.
Qui went to the police to report the "theft" but was told the weapon was not real property protected by law.
"Zhu promised to hand over the cash but an angry Qui lost patience and attacked Zhu at his home, stabbing him in the left chest with great force and killing him," the court was told.
The newspaper did not specify the charge against Qiu but said he had given himself up to police and already pleaded guilty to "intentional injury."
No verdict has been announced.
More and more online gamers were seeking justice through the courts over stolen weapons and credits, the newspaper said.
"The armor and swords in games should be deemed as private property as players have to spend money and time for them," Wang Zongyu, an associate law professor at Beijing's Renmin University of China, was quoted as saying.
But other experts are calling for caution. "The 'assets' of one player could mean nothing to others as they are by nature just data created by game providers," a lawyer for a Shanghai-based Internet game company was quoted as saying.