The agency that investigates Chicago police misconduct cases released the footage on Friday morning, calling it "shocking and disturbing."
Suspected car thief Paul O'Neal, 18, who was unarmed, died on 28 July after officers tried to stop him in a Jaguar convertible that had been reported stolen.
The video shows police firing on a vehicle speeding down a street at about 7:30pm in the city's South Shore neighborhood.
It goes through a stop sign and smashes head-on into another police car, before an occupant leaps out and runs.
Officers are seen pursuing a man through a yard and over a fence while shots are heard ringing out.
They handcuff O'Neal, who is seen face down on the ground with blood on the back of his t-shirt.
One officer can be heard saying: "I think I shot that mother******, man."
"Think I'm good - bunch of shots," he adds.
The officer who chased and shot O'Neal was wearing a body camera, but department officials said the shooting was not caught on film.
Police spokesman Anthony Guglielmi said they were trying to determine why the body camera was not functioning, but said he did not believe it was deliberately turned off.
However, Eric Russell, spokesman for Tree of Life and Justice League, was sceptical about that claim.
"There is a hunt going on," he told reporters. "The Chicago police are hunting black and brown people.
"Those of us who have been kissed by the sun have a target on our back."
Mr O'Neal's sister Briana Adams said she was "very hurt" by the incident.
"Words can't describe how I feel at this moment or how I felt when it happened," she said. "But I really want everybody to know that Paul was loved by my mother, his family, me.
"That was everybody's best friend. He loved to keep smiles on everybody's face, joking, playing basketball."
Police Supt Eddie Johnson has stripped three officers of their police powers after it was determined they may have violated department policy in the shooting.
The president of the Chicago police officer's union condemned the release of video evidence, saying it was unfair to the officers and could turn even jeopardise their safety.
It was the first time the city made public such material in a fatal police shooting under a new policy that calls for it to do so within 60 days.
The department has been trying to restore public confidence after video released last year showing another fatal police shooting of a black teenager.