All 30 teams were notified Friday that the Knicks will have five business days, until next Thursday, to offer Williams a contract. Without an offer in that time frame that meets league guidelines, Williams would then become an unrestricted free agent.
It is believed that the Knicks' pursuit of Williams is separate from their well-chronicled interest in Milwaukee Bucks restricted free agent Ramon Sessions, who is soon expected to sign an offer sheet with the Knicks.
The Los Angeles Clippers formally waived their exclusive rights to negotiate with Williams last Friday. He was then placed on waivers, giving any team the right by Friday to claim Williams and secure the exclusive negotiating rights that the Clippers surrendered.
L.A. faced a league deadline last Thursday to exercise those exclusive rights to re-sign Williams after the 33-year-old signed a one-year deal with the Clippers last August, only to decide in September to place himself on the league's voluntarily retired list to spend more time with his family.
In February, Williams' request to be immediately reinstated by the NBA was denied by a vote of 24 teams to six. League bylaws state that players wishing to return from the official voluntarily retired list need unanimous approval from all 30 teams to avoid a one-year mandatory waiting period, ostensibly so the league can discourage players from backing out of signed contracts to choose a new team.
Williams becomes eligible to play in exhibition, regular-season and playoff games on the one-year anniversary of his official retirement, which is Sept. 26.
In February, his agent, Dan Tobin, said the 10-year veteran was determined to come back in spite of the ruling that prevented Williams from latching on with a contender late last season.
"We anticipated this decision," Tobin said then. "So did Jason. But we look forward to seeing Jason back in the NBA in the 2009-10 season.
"One of the reasons we applied for reinstatement now was that we'd like to try to accelerate the process of him coming back."
The six teams that voted against letting Williams return last season were Atlanta, Chicago, Houston, Minnesota, San Antonio and the Clippers themselves. One suggested motivation for teams blocking Williams' return was an assumption that he would have quickly parted ways with the Clippers after reinstatement and signed with a playoff contender for the stretch run.
After signing a one-year deal with the Clippers in August, Williams abruptly changed his mind in September, informed the team that he was prepared to forfeit his contract and promptly filed retirement papers with the league.
In 679 regular-season games, Williams averaged 11.4 points, 6.3 assists and 2.4 rebounds while playing for Sacramento, Memphis and Miami. He has appeared in 53 playoff games, averaging 9.8 points, 3.7 assists and 2.2 rebounds and helping the Heat win its first and only championship in 2006.
He was drafted by Sacramento in 1998 following his junior year at Florida and was named to the 1999 NBA All-Rookie Team after averaging 12.8 points and 6.0 assists. He quickly became one of the most popular players in the Kings' Sacramento history, in tandem with Chris Webber.
Williams was dealt to Memphis in a trade featuring Mike Bibby before the 2001-02 season. Over the next four seasons he became the Grizzlies' career leader in assists and 3-point attempts. He joined the Heat before the 2005-06 season, as part of a trade which initially drew considerable criticism. But Williams and Antoine Walker helped Shaquille O'Neal, Dwyane Wade and Pat Riley win a championship in the newcomers' first season in Miami.
Williams' request to be reinstated has been described as unchartered territory because a player walking away from an active contract is so uncommon.
"My wife was pregnant at the time and it wasn't going too smoothly," Williams said in June of his sudden retirement in an interview with the Charleston (W.Va.) Daily Mail. "I just thought it was the right decision for my family.
"I'm just so blessed to have three healthy kids. It was tough [last season] because I missed playing, but I was glad to be home with my family."
Williams also told the newspaper that he would "like to play two or three more years" but insisted that "if it doesn't happen, trust me, I won't lose any sleep."
Marc Stein is a senior NBA writer for ESPN.com.