The man, 23, was arrested near the scene in Mayfield about 2.35pm and has been charged with attempted murder and wounding with intent to cause grievous bodily harm.
Police told reporters when they arrived at the Onyx Cafe on Mayfield Road officers found the woman with a knife still “embedded in her chest”.
Her alleged attacker, a man from Sandgate and the woman, 27, were colleagues at the cafe.
Detective Superintendent Wayne Humphrey told media in Newcastle following the incident that the alleged attack began in the kitchen with the use of a “blunt instrument”.
“It then progressed and a woman received a stab wound to the chest,” he alleged.
“The knife was embedded in her chest and remained in her chest when emergency services arrived.”
The woman was taken to John Hunter Hospital in a serious but stable condition.
The man was refused bail and will face Newcastle Local Court on Thursday.
The Onyx Cafe took to Facebook after the incident to inform customers it had closed until further notice.
Customers sent their wishes to staff in comments on the post.
“Such a sad day for you all … we will be back when you are ready to be back … stay safe … love to all staff and families,” one wrote.
Another said they had stopped by for coffee just 10 minutes before the incident unfolded.
“Sending thoughts and prayers for the (woman) and to all who witnessed a truly horrific event,” they wrote.