The Knicks waived Payton on Wednesday, per Shams Charania of Stadium and The Athletic. He was due $8 million in 2020-21.
New York has ultimately decided to bring Payton back at a reduced salary, however. The 26-year-old averaged 10.0 points, 7.2 assists and 4.7 rebounds last year for the Knicks.
Payton is the current leader in the clubhouse to start at point guard again for the Knicks, as he started 36 of 45 games played for the Knicks last year.
Knicks guards Frank Ntilikina and Dennis Smith Jr., who can also play point, are also under contract next year.
The Knicks have largely been conservative and prudent with their spending during this offseason. They notably inked swingman Alec Burks to a one-year, $6 million contract, according to Marc Berman of the New York Post, and cut ties with Bobby Portis and Taj Gibson.
New York added two players in the draft in Dayton's Obi Toppin and Kentucky's Immanuel Quickley.
The 2020-21 season will begin Dec. 22. The Knicks are looking to return to the playoffs for the first time since 2013.