Myles Turner scored 16 points and Tyrese Haliburton added 14 points, 11 assists and eight rebounds.
The fourth-seeded Pacers led by 10 points with two minutes 25 seconds left, but two free throws from OG Anunoby, five points from Jalen Brunson and a Josh Hart lay-up with 14 seconds left brought the Knicks to within one point at 110-109.
But Aaron Nesmith and Turner scored two free throws apiece for the Pacers to secure victory.
Brunson finished with 36 points to set a Knicks post-season record of 19 30-point games, while Karl-Anthony Towns and Mikal Bridges both scored 20 points and made seven rebounds.
Bridges said: “I know it is 2-0 but it is still a long series. We just have to find different ways to advance.”
The Oklahoma City Thunder lead the Minnesota Timberwolves 2-0 in the Western Conference finals.
The winners of each conference finals will meet in the NBA Finals from 5-22 June.
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