Julio Rodarte, 39, was arrested on suspicion of murder, and 10 counts of attempted murder.
"It's so sad you know, very sad," said Enrique Tores, who owns E & E Tires, located near the shooting. "In the back there were 5 or 6 people working you know, and I was afraid he would get in my business and start shooting people."
He says he heard close to 30 shots during the incident.
The incident happened on State Street, north of W. 7th Street just after 7 a.m. Monday. The video was obtained by ABC's Los Angeles affiliate KABC.
Rodarte apparently first stopped at a market in the area and attempted to buy a shot of liquor, but didn't have enough money. He left and moments later allegedly pulled out the gun and opened fire.
First he ditched the clip, then the gun. Then, Tores said, he took off all his clothes.
"He was completely naked, and he just kept walking. And that's when they called the cops."
Police soon arrived and took him into custody. Multiple cars were damaged, one man was killed and another was injured.
A GoFundMe account is set up for the family of 42-year-old Victor Hugo Leon, identified as the man who died in the shooting.
The page says Leon leaves behind a wife, three sons and a daughter. He was almost home after leaving his overnight work shift when he was shot.
"Victor's smile and sense of humor will be truly missed," the page says. "He leaves a hole in the hearts of us who knew him."