The victim reportedly tried to intervene in an argument between her attacker and his father, after the man escaped from a psychiatric hospital and showed up at his father's fifth-floor apartment.
The middle-aged woman, who lived in the apartment directly below, heard shouting and tried to mediate.
However, when she attempted to intervene, the man took out a knife and stabbed her to death before cutting off her head and throwing it through the windscreen of a parked car on the street below.
The incident, which took place in Chongqing Municipality in southwest China is being investigated by police.
A 30-year-old man was detained at the scene.