DJ Augustin sank a pair of free throws with 2.5 seconds remaining, and Danilo Gallinari's prayer from mid-court came up short as time expired to hand the Knicks their second consecutive defeat to open the season.
A 27-point fourth quarter had helped draw New York back into a contest they really had no right being in, and Gallinari even had a chance to win it in regulation, missing a 3-pointer with just one tick left on the clock.
Charlotte's Raymond Felton tied the game twice in the final 30 seconds of overtime on strong drives to the basket, and the game was finally decided in the second period of OT on a questionable foul.
Al Harrington appeared to get a clean block on Augustin with his right hand as he cut through the lane, but the officials ruled the Knicks' forward had impeded Augustin on his way to the hoop.
If there was any contact, it was not only minimal but also induced by the Bobcats' backup guard.
Harrington was both shocked and annoyed by the call—probably rightly so—although in truth the game should have been over much, much earlier.
Trailing 47-26 with 3:30 left in the first half, it looked as if the Knicks were on their way to being blown out for the second straight game in similar fashion to the way they were beat down in Miami on Wednesday.
The Knicks scored just 13 points in the first quarter, hampered by 4-of-20 shooting from the field.
By the time Derrick Brown's dunk had extended Charlotte's lead to 21 points, Mike D'Antoni's team were 9-of-35 and the game looked like it was headed to an embarrassing conclusion.
The Knicks dug deep though, getting production across the board in the second half to spearhead a determined comeback.
David Lee scored 17 points and picked up 18 rebounds for his first double-double of the year, and Al Harrington added 17 more despite shooting 1-of-7 from beyond the arc.
Starters Chris Duhon and Jared Jeffries chipped in with 13 points and 11 points respectively, and Nate Robinson came off the bench to provide the Knicks' offense with 17 points in 36 minutes of action.
The talking point of the defeat however will surround D'Antoni's use of sharp-shooting Gallinari who scored 16 points in 23 minutes.
After hitting three straight 3-pointers, Gallinari was benched in favour of Al Harrington mid-way through the fourth quarter with the Knicks down by six.
He returned to the game with seven seconds left in regulation with the score tied at 82-82. Had he played even a fraction of the final six minutes, the Knicks may have blown the game wide open.
Gallinari was then kept on the bench for the entire first period of overtime, and he was only reinserted back into the game with 50 seconds left in the second period of OT, promptly nailing back-to-back jump shots from 17ft and 19ft.
Neither team shot well enough to say they deserved to win (38 percent each), and the Knicks will look back on 27 misses from beyond the arc as a key reason for their defeat.
Felton scored 22 for the Bobcats and the frontcourt duo of Gerald Wallace and Boris Diaw combined for 35 points and 26 rebounds.
New York will now play the Philadelphia 76ers in the Knicks' home opener on Saturday night.