On July 16, 2012, Felton and Kurt Thomas were traded to the New York Knicks for Jared Jeffries, Dan Gadzuric, the rights to Kostas Papanikolaou and Giorgos Printezis, and a second round draft pick.
Felton signed a three-year, $10 million extension with the Knicks.
Felton came under fire because of the shape he was in with Portland.
Felton acknowledged his weight, saying, "I won’t make any excuses, I wasn't in shape."
At a Las Vegas Summer League game between the Knicks and the Toronto Raptors, Felton told Walt Frazier and Mike Breen he had lost more than 20 lbs.
Felton also said he felt he was better than Jeremy Lin, who was signed by the Houston Rockets that offseason.

On November 2, 2012, when the season tipped off for the Knicks, Felton recorded 14 points and 9 assists in a 104–84 win over the defending champion Miami Heat.
On November 15, 2012, Felton led the Knicks to a 104–100 road victory over the San Antonio Spurs as he helped his team overcome a 12-point deficit in the fourth quarter with his 25 points and 7 assists.
On December 6, 2012, Felton scored a season-high 27 points in a 112–92 road win over the Heat to hand them their first home loss of the season.
The Knicks won the game without Carmelo Anthony.
In mid December, Felton reportedly suffered a hand injury, but decided to play through it for some games.
After consulting a hand specialist, and being informed he did not have to have surgery, it was noted he would miss 4–6 weeks.
On January 23, 2013, he was medically cleared for contact, and he made his return on January 26, 2013, against the Philadelphia 76ers.

On February 25, 2014, Felton was reportedly arrested on felony gun charges.
As part of a plea deal, Felton pleaded guilty to attempted criminal possession of a weapon and criminal possession of a firearm.
 He was assessed a $5,000 fine and 500 hours of community service.
In addition, the NBA suspended Felton for the first four games of the 2014–15 season.
On July 16, 2012, Felton and Kurt Thomas were traded to the New York Knicks for Jared Jeffries, Dan Gadzuric, the rights to Kostas Papanikolaou and Giorgos Printezis, and a second round draft pick. Felton signed a three-year, $10 million extension with the Knicks. Felton came under fire because of the shape he was in with Portland. Felton acknowledged his weight, saying, "I won’t make any excuses, I wasn't in shape." At a Las Vegas Summer League game between the Knicks and the Toronto Raptors, Felton told Walt Frazier and Mike Breen he had lost more than 20 lbs. Felton also said he felt he was better than Jeremy Lin, who was signed by the Houston Rockets that offseason.
On November 2, 2012, when the season tipped off for the Knicks, Felton recorded 14 points and 9 assists in a 104–84 win over the defending champion Miami Heat. On November 15, 2012, Felton led the Knicks to a 104–100 road victory over the San Antonio Spurs as he helped his team overcome a 12-point deficit in the fourth quarter with his 25 points and 7 assists. On December 6, 2012, Felton scored a season-high 27 points in a 112–92 road win over the Heat to hand them their first home loss of the season. The Knicks won the game without Carmelo Anthony. In mid December, Felton reportedly suffered a hand injury, but decided to play through it for some games. After consulting a hand specialist, and being informed he did not have to have surgery, it was noted he would miss 4–6 weeks. On January 23, 2013, he was medically cleared for contact, and he made his return on January 26, 2013, against the Philadelphia 76ers.
On February 25, 2014, Felton was reportedly arrested on felony gun charges. As part of a plea deal, Felton pleaded guilty to attempted criminal possession of a weapon and criminal possession of a firearm.  He was assessed a $5,000 fine and 500 hours of community service. In addition, the NBA suspended Felton for the first four games of the 2014–15 season.
Raymond Felton