Over four days, prosecutors called investigators, McKinney's then-girlfriend and another friend, but they didn't call his alleged accomplice.
In an hour-long jailhouse recording played for jurors on Thursday, McKinney described how he and a friend intended only to rob Shepard.
But as the three were riding in a pickup truck, McKinney told police, Shepard "starts grabbing my leg and my genitals. I don't do that stuff.
"I hit him ... and he kept throwing himself all over me," he said.
McKinney said he delivered all the blows to Shepard. He said the friend, Russell Henderson, stood by and laughed.
"We had really no intention of hurting this guy," he said. "It was to take him out and scare him and take his wallet and leave."
Rob DeBree, the lead police investigator, said McKinney claimed he was told by Shepard "he could turn us on to cocaine or methamphetamine in exchange for sex."
There was no evidence Shepard had access to methamphetamine, but "we were advised Matt had dabbled in some drug [cocaine] activity prior to that," DeBree said.
Shepard, a 21-year-old University of Wyoming student, was left for 18 hours on the freezing prairie, and died on Oct. 7, 1998. His death has galvanized those seeking to expand the nation's hate-crime laws.
McKinney, 22, is charged with robbery, kidnapping and murder, and could be sentenced to death if convicted. Henderson, also 22, is serving two life sentences for murder and kidnapping.
McKinney said Shepard approached him and Henderson in a Laramie bar. Shepard didn't make a pass at the two. "All he really did is ask for a ride home," McKinney said.
When asked about his attitude toward gays, McKinney said, "I really don't hate them, but I don't like them."
In the truck, McKinney said, Shepard made an aggressive sexual advance and the beating began. The assault continued at a ranch a mile from Laramie, and McKinney let Henderson tie Shepard to a fence.
When the two asked Shepard if he had seen the license plate of their truck, McKinney said, Shepard read the plate numbers back. McKinney said he struck him three final times.
Though he thought Shepard would die there, McKinney didn't call an ambulance.
While the tape was played, the jury read along with transcripts. Shepard's mother, Judy, stared or gazed down.
Defense attorneys are trying to convince the jury McKinney is guilty of manslaughter rather than murder. They have argued that he acted during a drunken, drug-induced rage, after a sexual advance by Shepard had triggered memories of a childhood homosexual assault.
Earlier, McKinney's former girlfriend testified that the two plotted to pose as homosexuals and rob Shepard, and tha McKinney later acknowledged they had killed someone.
McKinney claimed "a gay guy had been hitting on him [in the bar]," Kristen Price, 19, told jurors. "They decided in the bathroom to pretend they were gay, get him in the truck and rob him."
Later that night, McKinney, covered in blood, returned to their home and told her "he had killed someone," she said. He went to a sink to wash off a wallet, two driver's licenses and a voter registration card.
She also testified that she didn't see any sign that McKinney had been using drugs.
Her testimony was intended to counter defense contentions that the robbery wasn't planned and was related to drugs.