The deal is for two years, $7 million with a team option for the second year, sources told ESPN.
The Knicks were rapidly closing on 45 days of allowable NBA service under Trier's two-way deal, clearing the way for general manager Scott Perry to negotiate use of the team's full bi-annual exception over the next seasons.
Trier will earn nearly $3.4 million this season and $3.5 million in 2019-20 under the bi-annual exception, sources told ESPN.
Trier, 22, is signing the biggest contract to emerge out of the brief history of the two-way contract format -- and a contract with the largest first-year salary for a non-international undrafted player. The previous high was Malcolm Delaney, who made $2.5 million in his first season with the Atlanta Hawks.
Trier has averaged 11.3 points, including 39 percent shooting on 3-pointers, in 23 minutes a game for the Knicks. He scored 25 points in a victory over New Orleans on Nov. 23.
His explosiveness and versatility captured the Knicks' attention in the pre-draft process, where they worked out an agreement once Trier went undrafted.
Trier's representatives at Independent Sports and Entertainment told teams that were interested in drafting him -- with a contingency of signing him to a two-way contract -- that Trier wouldn't agree to that kind of a deal if selected in the second round. His agent, James Dunleavy, targeted a two-way free-agent deal with New York as the best opportunity for him to become a rotation player and contribute immediately.
In the end, the partnership blossomed into Trier quickly proving himself as a keeper for the rebuilding Knicks.
New York plans to have enough money to sign a top free agent in the summer of 2019. With the Trier signing, the Knicks project to have less than $30 million in cap space. The projected max contract for a player with 7-9 years of service is $32.7M and is $38.15M for a player with 10 or more years of service, which means the Knicks will need to clear more money from their 2019-2020 roster to have enough money to sign a max free agent.
Trier, a two-time All-Pac 10 performer, played three seasons at the University of Arizona. During his junior year, he tested positive for a banned substance prior to the NCAA tournament.
To make room for Trier, the Knicks cut Ron Baker, who started 14 games and averaged 3.3 points over three seasons with the Knicks, with whom he signed a two-year, $9 million deal in the summer of 2017.
"Ron is a true professional and we thank him for all of his contributions during his time with the Knicks," Knicks president Steve Mills said in a statement. "His dedication and passion for the game are unquestioned and have been truly appreciated by our fans and organization."