Oakley was arrested and charged with five misdemeanors -- two for assault, two for harassment and one for trespassing -- in the altercation in which security physically removed him from the arena at the start of a Feb. 8 game. The incident stemmed from a longstanding dispute Oakley had with Knicks owner James Dolan.
Oakley, 53, admitted no wrongdoing but agreed to stay away from Madison Square Garden for one year as part of the deal. The charges will be dismissed if Oakley stays out of trouble for six months and adheres to the ban.
Oakley accepted the same deal he rejected in early June -- an adjournment in contemplation of dismissal that can lead to the charges being dropped. He previously requested a trial.
"Like I said from day one I wasn't wrong," Oakley said Friday after taking the deal in Manhattan Criminal Court. "Why keep wasting time? Let's try to keep the streets better for kids instead of going to court."
NBA commissioner Adam Silver and Charlotte Hornets owner Michael Jordan -- a former teammate of Oakley with the Chicago Bulls -- met with Dolan and Oakley after the incident in hopes of ending the dispute. Dolan extended an offer to Oakley to return to Madison Square Garden but the former power forward declined.
Oakley played 10 seasons for the Knicks from 1988-98 and was a fan favorite. In recent years, he was been highly critical of the organization and that helped ignite the dispute with Dolan.
Oakley averaged 9.7 points and 9.5 rebounds over 19 NBA seasons.