Richard Osborn-Brooks, 78, was arrested on suspicion of murder after fatally wounding the intruder during a suspected burglary at his home at around 12.45am on Wednesday.
Neighbours of the elderly man defended his actions, saying he should not be punished for simply protecting himself.
He has been bailed to return to a south London police station in early May pending further inquiries, the Metropolitan Police said.
Officers were called to reports of a burglary in progress after two men entered a house in South Park Crescent in Hither Green, south-east London, police said.
One suspect, armed with a screwdriver, forced the homeowner into his kitchen when he discovered them, while his accomplice went upstairs, the force said.
Detectives believe a struggle ensued between “one of the males and the homeowner” and the intruder, 37, was stabbed in the upper body but they refused to confirm whether the suspect had been stabbed with the screwdriver.
An eyewitness said the suspected burglar had an accomplice who dragged him towards a van before leaving him for dead.
He was found collapsed in nearby Further Green Road by paramedics from London Ambulance Service, who took him to a central London hospital where he died at 3.37am.
Adam Lake, who lives near the scene, said he did not feel safe from crime and that Mr Osborn-Brooks was “just protecting himself”.
He said: “He doesn’t deserve to be punished for defending himself, and the neighbours that I’ve spoken to all agree that the priority needs to be to support him after everything that he’s been through.
“He was just protecting himself after all.”
One neighbour, who asked not to be named, said the homeowner had been retired for 26 years.
A witness, who lives in the road, told the Press Association he saw an accomplice try to rescue the suspect just before midnight before fleeing the scene.
He recalled seeing a white Vauxhall Astra van pull up next to a man “moaning and groaning” on the street who was “bleeding heavily from his chest through his shirt”.
Its driver attempted to drag the man into the vehicle before driving off north when he noticed he was being watched, he said.
The witness told the Press Association: “People have been talking about a screwdriver but this wasn’t a screwdriver wound, this was a knife. The wound was an inch long.
“I think that it was a knife and I think from what my partner said that the black guy (the driver) pulled it out and threw it away.
“The man on the ground was wearing a blue T-shirt and it was pulled up. I think he was dead already. His pupils were completely dilated.”
The second suspect fled the scene and has yet to be found.
The pensioner, who suffered bruising to his arms, was initially arrested on suspicion of grievous bodily harm but was further arrested on suspicion of murder, the Met said.
At least five forensic officers entered the house, guarded by police, on South Park Crescent just before 1pm on Wednesday.
A large purple forensic tent was erected by the front door.
The dead suspect’s next of kin have been informed. A post-mortem examination will be carried out in due course.
Anyone with information is asked to contact police on 101 or Crimestoppers anonymously on 0800 555 111.