The Knicks announced in a statement Friday that Walsh and Madison Square Garden chairman James Dolan mutually agreed that Walsh will not return when his contract expires at the end of June, a somewhat surprising departure and major loss for a team coming off its best season in a decade.
The 70-year-old Walsh said he decided Thursday that he wasn’t up to Dolan’s request that he stay on for at least two years.
“I wasn’t sure that I wanted to go and devote myself multiyear. On the other hand, I understand why he would want that,” Walsh said on a conference call.
It also opens questions about whether coach Mike D’Antoni will return for the final year of his deal, though Walsh indicated D’Antoni would stay.
“I know that he is the guy that can take this team to the next level,” Walsh said. “Mike wants to see the job through.”
Walsh apparently would have been back had he been willing to agree to stay for at least a couple of seasons, especially since the next one is in jeopardy because of the NBA’s labor situation. But he has battled health problems and was separated from most of his family, who remained in Indiana when he came to New York.
“I do miss my wife and my family, and this is a 24-7 situation, as a lot of GM situations are. This is even more intense,” Walsh said. “I’m running out of energy.”
Walsh spent three seasons in New York, leading a massive rebuilding effort that got the Knicks back into the playoffs this season following the acquisitions of Amare Stoudemire and Carmelo Anthony.
But Dolan didn’t pick up his option for next season, and the two couldn’t agree on terms of an extension.
“In a relatively short time with the Knicks, Donnie made a tremendous impact, which will be felt for many years to come,” Dolan said. “We thank Donnie for his leadership, hard work and many contributions to the revitalization of the team.”
The Knicks said Walsh, who plans to move back to Indiana, will be a consultant next season. Senior vice president Glen Grunwald will serve as interim general manager.
Walsh arrived in New York following the 2007-08 season and immediately went to work cleaning up the mess left by Isiah Thomas. That meant spending two seasons reducing one of the league’s highest payrolls, getting the Knicks far enough under the salary cap to afford two top players last summer.
The Knicks got only Stoudemire but traded for Anthony in February and finished 42-40, their first winning record in a decade. They were swept by Boston in their first postseason since 2004, and the roster needs significant upgrades to compete with the top teams in the Eastern Conference.
Walsh had said he wanted to return to make them, but his desire lessened as time went on, realizing that he couldn’t do the job at less than 100 percent. But he’s satisfied that he made enough steps to get the Knicks moving forward again.
“I’m not bailing. I do have the team where it is,” he said. “I understand that the franchise needs a commitment for more than one year.”
Walsh denied any friction with Dolan or Thomas, whom the owner has remained close with and was nearly hired last summer as an adviser.
“I don’t think Isiah Thomas had anything to do with basically anything I’m doing now,” Walsh said, calling reports of Thomas’ involvement “an annoyance.”
The highly respected Walsh came to his hometown team after spending 24 years with the Indiana Pacers. He joined their front office as general manager in 1986, became team president in 1988 and CEO in 2003, turning the franchise into a perennial Eastern Conference contender that reached the NBA finals in 2000.
He brought professionalism to a Knicks organization that had become an embarrassment on and off the court during Thomas’ reign, unloading some of the burdensome contracts that hindered them for years and relaxing the team’s media policies.
His draft record in New York was underwhelming — high lottery picks Danilo Gallinari and Jordan Hill are already gone, though Gallinari was used in the Anthony trade — but Walsh always said his focus was free agency, believing that was the quickest way to rebuild a team.
“I think I did that,” Walsh said. “I think I did the first step of that.”
Follow Brian Mahoney on Twitter at