On December 5, 1980, Halberstam was shot at his Washington, D.C. home by Bernard C. Welch, Jr., an escaped convict living in the area. Halberstam and his wife surprised Welch when they returned to their home while Welch was committing a burglary. Despite having been shot twice in the chest by Welch, Halberstam told his wife to get into their car, and he drove them toward Sibley Hospital. On the way to the hospital, Halberstam saw Welch, shouted, "That's the guy!" and swerved to hit him. Welch was wounded, but not fatally injured. Halberstam crashed his car into a tree near the hospital, and was brought to the emergency room by ambulance. His colleagues were unable to save him, and Halberstam died on the operating table approximately 90 minutes after he was shot. District of Columbia police arrested the wounded Welch. At Welch's trial, the prosecuting attorney pointed at him, and used Halberstam's words, "That's the guy!" Welch received life sentences for one count each of felony murder and second-degree armed burglary, to be served concurrently, four counts of burglary and four counts of grand larceny totaling 143 years. Bernard Welch died in prison in 1997.
In 1981 Halberstam was posthumously awarded the BUMC Distinguished Alumnus Award.