Donnie Walsh will no longer be running the show for the New York Knicks once the month of June finishes out and it doesn’t look like the team will be hiring anybody externally to fill his spot.

The New York Daily News reports that “the team of Scott O’Neil, Glen Grunwald and Mark Warkentien … are the front-runners to run the basketball operation.”

The paper notes that Grunwald is the former GM of the Toronto Raptors and “an Isiah Thomas disciple.” He is currently serving as the interim GM for the team.

A source tells the paper that Grunwald’s “responsibilities would be to handle the day-to-day functions on the basketball side along with Warkentien,” who once served as GM of the Denver Nuggets.

Meanwhile, Allan Houston(notes) will continue to work in the front office “with the plan being for (owner Jim) Dolan’s all-time favorite Knick to eventually run the club at some point,” the Daily News notes.

Until then, though, the paper reports that it “would appear” that Isiah Thomas “will continue to serve as an unofficial adviser to Dolan,” who “feels that Thomas is a valuable asset when it comes to recruiting high-profile free agents.” Dolan, sources told the paper, “blamed Walsh for the Knicks’ failure” to snag LeBron James(notes) last summer.

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Source: New York Daily News

Related: LeBron James, Denver Nuggets, New York Knicks, Toronto Raptors

New York (AP) —  Donnie Walsh will not return as president of the New York Knicks, who must find someone else to continue the building job he started.

The Knicks announced in a statement Friday that Walsh and Madison Square Garden chairman James Dolan mutually agreed that Walsh will not return when his contract expires at the end of June, a somewhat surprising departure and major loss for a team coming off its best season in a decade.

The 70-year-old Walsh said he decided Thursday that he wasn’t up to Dolan’s request that he stay on for at least two years. “I wasn’t sure that I wanted to go and devote myself multiyear. On the other hand, I understand why he would want that,” Walsh said on a conference call.

It also opens questions about whether coach Mike D’Antoni will return for the final year of his deal, though Walsh indicated D’Antoni would stay.

Walsh apparently would have been back had he been willing to agree to stay for at least a couple of seasons, especially since the next one is in jeopardy because of the NBA’s labor situation. But he has battled health problems and was separated from most of his family, who remained in Indiana when he came to New York. Walsh spent three seasons in New York, leading a massive rebuilding effort that got the Knicks back into the playoffs this season following the acquisitions of Amare Stoudemire and Carmelo Anthony. But Dolan didn’t pick up his option for next season, and the two couldn’t agree on terms of an extension.

Walsh arrived in New York following the 2007-08 season and immediately went to work cleaning up the mess left by Isiah Thomas. That meant spending two seasons reducing one of the league’s highest payrolls, getting the Knicks far enough under the salary cap to afford two top players last summer. The Knicks got only Stoudemire but traded for Anthony in February and finished 42-40, their first winning record in a decade. They were swept by Boston in their first postseason since 2004, and the roster needs significant upgrades to compete with the top teams in the Eastern Conference. Walsh had said he wanted to return to make them, but his desire lessened as time went on, realizing that he couldn’t do the job at less than 100 percent. But he’s satisfied that he made enough steps to get the Knicks moving forward again.

A former USC assistant coach under Frank McGuire for 12 seasons, Walsh came to his hometown team after spending 24 years with the Indiana Pacers. He joined their front office as general manager in 1986, became team president in 1988 and CEO in 2003, turning the franchise into a perennial Eastern Conference contender that reached the NBA finals in 2000. He brought professionalism to a Knicks organization that had become an embarrassment on and off the court during Thomas’ reign, unloading some of the burdensome contracts that hindered them for years and relaxing the team’s media policies.

New York Knicks president/general manager Donnie Walsh, in the wake of being overruled in the Carmelo Anthony trade, wanted full autonomy in basketball decisions. Knicks owner James Dolan was unwilling to give him that.

So, on Friday, the Knicks announced that Walsh had been relieved of his duties and that Glen Grunwald would serve as interim G.M. The Knicks’ statement says Walsh, whose contract was set to expire at the end of the month, would remain with the team as a consultant.

“Following a long series of discussions regarding his future role with the New York Knicks, Donnie Walsh and I have mutually agreed that he will be leaving his position as president, basketball operations of the Knicks, at the end of June,” Dolan said in a statement. “Donnie will remain with the team as a consultant for the 2011-12 season.

“In a relatively short time with the Knicks, Donnie made a tremendous impact, which will be felt for many years to come. We thank Donnie for his leadership, hard work and many contributions to the revitalization of the team.”

Walsh spent three seasons in New York, leading a massive rebuilding job that got the team back into the playoffs this season following the acquisitions of Amare Stoudemire, Chauncey Billups and Anthony.

Walsh and the Knicks had been negotiating a contract extension, but neither Walsh nor Dolan would compromise on who had final authority over the roster.

Walsh and coach Mike D’Antoni didn’t see eye-to-eye, either. Walsh hired D’Antoni in 2008, but the pairing was an odd mix from the start. Walsh’s best teams have been defense-first, half-court types of teams. D’Antoni runs a wide-open, high-scoring game plan.

D’Antoni’s future with the club is up in the air, too. He is entering the final year of his contract.

Walsh and D’Antoni arrived in New York following the 2007-08 season and immediately went to work cleaning up the mess left by Isiah Thomas, who had served in both roles. For Walsh, that meant spending two seasons reducing one of the league’s highest payrolls, getting the Knicks far enough under the salary cap to afford two top players last summer.

The Knicks got only Stoudemire but traded for Anthony in February and finished 42-40, their first winning record in a decade. They were swept by Boston in their first postseason since 2004, and the roster needs significant upgrades to compete with the top teams in the Eastern Conference.

Walsh had said he wanted to return, but he has battled health problems and didn’t appear to have complete basketball control, with Dolan still relying on the advice of Thomas even after Walsh fired him.

NEW YORK — Donnie Walsh’s tenure as president and general manager of the New York Knicks is ending, team owner James Dolan said Friday.

“Following a long series of discussions regarding his future role with the New York Knicks, Donnie Walsh and I have mutually agreed that he will be leaving his position … at the end of June,” Dolan said in a statement.

Walsh will work in a consultant’s capacity for the team next season.

The stunning piece of news comes four weeks before Walsh’s contract is due to expire, and after several weeks of face-to-face discussions between Walsh and Dolan. The team had imposed a news blackout around the discussions, and neither Walsh nor his agent had commented on his job status since the first round of the playoffs.

Walsh’s departure opens questions about whether coach Mike D’Antoni will return for the final year of his contract.

The Knicks had an April 30 deadline to pick up the fourth-year option on Walsh’s contract, which he signed in 2008 following the troubled tenure of former team president and coach Isiah Thomas. But that date passed with no action being taken, and Walsh and Dolan were discussing a new contract that would keep him with the team at least through the 2012-13 season. Walsh’s desire to have full autonomy was reportedly one of the sticking points.

Thomas has continued to keep in contact with Dolan and was believed by many — including Walsh, a team source said — to be influencing the team’s personnel decisions.

Walsh gutted the roster over his first two seasons to clear enough salary cap space to sign two maximum-salary free agents. LeBron James was No. 1 on the Knicks’ wish list, but they settled for Amare Stoudemire last July and then got their second max player by acquiring Carmelo Anthony from the Denver Nuggets two days before the NBA trade deadline in mid-February.

But the Knicks gave up a lot in the trade — Raymond Felton, Wilson Chandler, Danilo Galinari, Anthony Randolph, Timofey Mozgov, several draft picks, cash and Eddy Curry’s expiring contract — and there was a school of thought (denied by the Knicks) that Dolan had taken over the negotiations and had undermined Walsh.

The Knicks were swept 4-0 by the Boston Celtics in the first round of the playoffs.

“In a relatively short time with the Knicks, Donnie made a tremendous impact, which will be felt for many years to come,” Dolan said. “We thank Donnie for his leadership, hard work and many contributions to the revitalization of the team.”

The Knicks said their search for a new president and general manager will begin immediately. Glen Grunwald, the club’s senior vice president of basketball operations, will serve as interim GM beginning in July and will oversee all player transactions.

The highly respected Walsh came to his hometown team after spending 24 years with the Indiana Pacers. He joined their front office as general manager in 1986, became team president in 1988 and CEO in 2003, turning the franchise into a perennial Eastern Conference contender that reached the NBA finals in 2000.

He brought professionalism to a Knicks organization that had become an embarrassment on and off the court during Thomas’ reign, unloading some of the burdensome contracts that hindered them for years and relaxing the team’s media policies.

His draft record in New York was underwhelming — high lottery picks Gallinari and Jordan Hill are already gone — but Walsh always said his focus was free agency, believing that was the quickest way to rebuild a team.

He refused throughout the season to talk about his future, including reports he was angered that Dolan got involved in the pursuit of Anthony. But his wife and much of his family had remained in Indiana after Walsh came to New York, so he had reason to leave if he wasn’t happy with a new contract offer.

Walsh is scheduled to give a statement at 1:30 p.m. ET.

Chris Sheridan covers the NBA for ESPN.com. Information from The Associated Press was used in this report.

Follow Chris Sheridan on Twitter: @csheridanespn