As part of the trade, the Knicks will receive center Sam Dalembert and guards Jose Calderon, Shane Larkin and Wayne Ellington and the Mavericks' two second-round picks in Thursday's NBA draft – the 34th and 51st overall selections, sources said.
The trade is the first major move by new Knicks president Phil Jackson to change the team's roster. Jackson thinks Calderon will be a good fit to run the triangle offense Jackson used to help win 11 championships with the Chicago Bulls and Los Angeles Lakers, sources said.
Larkin gives the Knicks a change-of-pace guard.
Chandler, 31, returns to Dallas, where he spent the 2010-11 season and won a championship with the Mavericks. He left after that season for a four-year, $60 million contract with the Knicks. Chandler has one year worth $14.6 million left on the contract.
The Knicks have been in pursuit of draft picks and No. 34 has value to them, sources said.
ESPN.com first reported the framework of the deal.