Houston originally retired in October 2005 with chronic knee pain, then tried a comeback again last month before aborting it.
"Allan has great knowledge and understanding of this league and our franchise, and I think he will be a tremendous asset to our front office in player development as he continues to learn and educate himself," Knicks president of basketball operations Donnie Walsh said. "I have always respected Allan as a player and as a person, and I have been thoroughly impressed with the work he has put in with our organization."
Houston is currently fourth on the Knicks' career scoring list. Only franchise legends Patrick Ewing, Walt Frazier and Willis Reed have scored more points during their regular season careers with New York. He was also a two-time NBA All-Star and a member of the Gold medal-winning United States team at the 2000 Summer Olympic Games in Sydney.
"I am honored and grateful that Donnie Walsh and the New York Knicks have trusted me with an opportunity to lend myself to serving this team and organization," Houston said. "To learn from someone who has built such a remarkable legacy is very exciting for me. Coach (Mike) D'Antoni is one of the brightest minds in the game of basketball. Being around the game all of my life, I realize what an awesome opportunity we have to positively impact our fans, especially our youth. I am extremely blessed to have witnessed a special era in New York Knicks history, and I know basketball fans everywhere, especially Knick fans, are ready for the return of this franchise. Hopefully, I will serve in being a part of that again."
Houston is also New York's eighth-leading scorer during the playoffs.