The big man turned down the offer because he wished to remain in the NBA, the source said. Ewing has served as an assistant coach for eight seasons, with the Washington Wizards, Houston Rockets and, most recently, the Orlando Magic.
One source close to Ewing said the Hall of Famer felt a bit slighted by the Knicks' offer to coach the Erie Bayhawks because he has already established himself in the NBA.
"Patrick has paid his dues," the source said. "He was a little insulted."
The Knicks have had several coaching staff openings since Ewing began coaching, but they've passed over the franchise's all-time scoring leader again and again.
Ewing has not been shy about his desire to return to New York.
"I'd be interested in any job, but this is home, naturally," Ewing told ESPNNewYork.com's Ian O'Connor in late March. "I still have my place here (in New Jersey), and I'd love to interview for any job, here or anywhere.
"I played here. I know the ins and outs of New York, the media, the fans."
Ewing was not retained by the Magic after they fired Stan Van Gundy in May.
He interviewed for head coaching jobs in Charlotte and Portland in the offseason but did not get either position.
He recently told reporters that he does not want to be pigeon-holed as a big-man coach.
"I consider myself a coach," Ewing told reporters. "Even though I did play the position and (am) very knowledgeable about the position, I feel that I'm knowledgeable about every position."
The New York Daily News earlier reported that Ewing declined the Knicks' offer.
As far as the Knicks' D-League opening, assistant general manager Allan Houston, who also serves as GM of the Erie BayHawks, told reporters on Monday that the team had settled on a coach. But Houston did not reveal who the coach was, other than to say that the coach has experience coaching in the D-League.
Jay Larranaga left the Erie head coaching position in late August to take a job as an assistant coach with the Boston Celtics.
The Knicks also have an opening on their NBA coaching staff, but it does not appear that Ewing is a candidate.
Former Bobcats assistant Lasalle Thompson is considered a leading candidate for the assistant's job, according to two sources.
Thompson, a 15-year veteran, played with current Knicks coach Mike Woodson with the Kansas City Kings from 1982-83 to 1984-85.
Ian Begley is a regular contributor to ESPNNewYork.com.