Lawson, 28, is expected to sign his contract with Indiana this weekend. The Pacers officially requested waivers for forward Chase Budinger on Saturday morning.
Houston acquired Lawson last summer from the Denver Nuggets. Lawson was supposed to take the ballhandling duties away from shooting guard and leading scorer James Harden, but instead he was benched after just 11 games and played poorly the entire season.
Lawson ranks last (83rd) among point guards in real plus-minus at minus-5.95. After finishing third in the NBA in assists last season with 9.6 per game, Lawson averaged just 3.4 this season, the lowest total since his rookie season in 2009-10. Lawson has set career lows in field goal percentage (38.7), points per game (5.8) and offensive rating per 100 possessions (98).
When the Rockets acquired Lawson, the biggest concern was about his off-court behavior. He was arrested twice last year for DWI, once in Denver and once in Los Angeles, which eventually resulted in two league-mandated suspensions this season.
In his seven-year career, including six in Denver, Lawson has averaged 13.3 points and 6.2 assists.