Lin was released Sunday by the Rockets to make roster room for Houston's signing of Samuel Dalembert.
The Rockets had claimed Lin off waivers after he was released by the Golden State Warriors, who had to let him go to create the requisite salary-cap space for a four-year offer sheet worth nearly $43 million to then-restricted DeAndre Jordan that was matched by the Los Angeles Clippers.
Lin is a Bay Area native who played in 29 games last season as a rookie with the Warriors, becoming the NBA's first Asian-American player since 1947.
The Knicks, who last week claimed sharpshooter Steve Novak off waivers, needed another guard after rookie Iman Shumpert suffered a knee injury in New York's Christmas Day win over Boston. New York is also still waiting for recently signed point guard Baron Davis to recover from a back injury in order to thrust him into the starting lineup.
"He can really get in the lane and distribute the basketball," Knicks coach Mike D'Antoni said of Lin on Tuesday. "We haven't seen him for a couple of years, but when we worked him out, we liked him. We'll see."
Lin will join the Knicks in the Bay Area on Wednesday prior to their game against Golden State. Reserve point guard Mike Bibby is expected to return from a back injury on Wednesday against the Warriors.
The ailment sidelined Bibby for the Knicks' season-opening win over Boston on Sunday. If Bibby is healthy enough to play, Lin, a former standout at Harvard University, will serve as the Knicks' third point guard. Toney Douglas is the starting point guard for the Knicks.
"If someone wakes up with a cold, he's playing a lot. If not, then we'll see," said D'Antoni, who quipped that Lin "might be the smartest guy we have."
Just how long the Knicks plan to keep Lin is unclear. His contract is not guaranteed, so the Knicks can waive him at any time prior to Feb. 10 without having to pay the remainder of his contract.
If and when Shumpert returns from his injury, he will likely resume his role as one of the team's three point guards, leaving Lin as the odd man out.
Lin's addition gives the Knicks 15 players on their roster. They still have the $2.5 million "room" exception available to acquire a free agent. If they choose to add another player, they would need to free up a roster spot.
"Jeremy's just looking for an opportunity to show what he can do," his agent Roger Montgomery said on Tuesday. " And, what better place to do so, than on the biggest stage in basketball?"
Senior writer Marc Stein covers the NBA for ESPN.com. Information from ESPNNewYork.com's Ian Begley was used in this report.