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 seven 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 didn’t 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 June 25, 2014, Felton, along with Tyson Chandler, was traded to the Dallas Mavericks in exchange for Shane Larkin, Wayne Ellington, José Calderón, Samuel Dalembert, and the 34th and 51st picks in the 2014 NBA draft.
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