Thor and Loki's relationship has long been fractured. Loki's quest to best his half-brother and land on the throne as the rightful King of Asgard has always usurped any progress the two have made in mending their differences. However, once Thor was forced to kill his brother after the God of Mischief's antics became deadly.
Thor #432 by Tom DeFalco, Ron Frenz, Al Milgrom, Mike Rockwitz, and Chris Eliopoulos saw Thor merge with a man named Eric Masterson. In the arc, Eric's son Kevin is captured by Loki and in order to save his son, the evil god wants Thor to surrender his hammer. Thor decides to temporarily vanish Mjolnir to another dimension and goes after his brother. Thor manages to free Kevin, but the two's battle rages on.
Thor's fight eventually spills over into the streets, where Loki tries to kill Kevin once and for all. As Loki sends an energy blast at Kevin and his mother, the Enchantress forces Eric's friend Susan to jump in front of it. Seeing Loki kill an innocent bystander proves to be enough for Thor. With tears running down his cheeks, Thor becomes one with his hammer and then uses an "ancient and forbidden" process which ends Loki's immortality. Loki screams at his brother as his body disappears.
Loki's death is felt immediately by Odin, who calls out that his son is dead before saying Thor must be punished for breaking his divine edict. Thor is banished to Hell, as Eric Masterson is split from his being. Eric wonders where Thor is before he becomes the new Thor himself. It's one of the more wild endings in a Thor-starring comic: Loki is dead, Thor is banished from Asgard to Hell, and Eric is the new Thor.
Thor (and Eric) were overcome with grief and anger seeing Susan get killed by Loki. So, their reaction of immediately breaking sacred laws to strip Loki of his immortality and kill him might have been emotional, but it's reasonable given the circumstances. Like in all comics (and even films) Loki didn't stay dead. But, the fact Thor broke his father's rule to kill his brother emphasizes just how powerful the moment was. Thor killed Loki because he had no other choice - he couldn't sit by as his brother killed innocent bystanders (and people Eric deeply cared about). Ultimately Thor made a tough, but understandable decision.