The informant said in a recent deposition that he had no evidence to back up earlier statements that Knight and former Officer David A. Mack planned the rap star's murder, according to the Los Angeles Times, which reviewed a deposition transcript for the story in its Friday edition.
The rapper, who was born as Christopher Wallace, was gunned down March 9, 1997, after a music-industry party in the Mid-Wilshire district. The case remains unsolved.
The deposition was related to a wrongful-death lawsuit against the city of Los Angeles by Wallace's estate, his mother, Voletta Wallace, and other relatives. The suit contends that LAPD officials covered up police involvement in the rapper's death, and seeks unspecified monetary damages.
It is scheduled to go to trial in U.S. District Court on June 14.
The informant, known to police as "Psycho Mike," contacted detectives four months after Wallace's death from the county jail and offered information about the rapper's killer in exchange for an early release.
His initial statements formed the basis of the theory that Knight, founder of Death Row Records, conspired with Mack to arrange the shooting. According to the scenario, a college friend of Mack's, a Southern California mortgage broker named Amir Muhammad, ambushed Wallace as his motorcade waited at a stoplight.
The informant, who described himself as a paranoid schizophrenic, picked Muhammad's picture out of a police photo lineup in 1998. Five years later, he served as an undercover operative in an FBI investigation that focused on Muhammad.
Based on the informant's statements, police searched Death Row's office and several of Knight's homes. They could not find any evidence linking Mack, Muhammad or Knight to Wallace's slaying. In 2000, the LA Times reported that Muhammad was no longer a suspect in the case.
The theory was revived, however, in 2003 when an FBI agent in Los Angeles saw a VH-1 special on Wallace's death and contacted the informant, who told him that Muhammad had confessed to Wallace's slaying at a Compton party in early 1998, according to the deposition.
The FBI had the man wear a wire and try to elicit a taped confession from Muhammad, who instead called 911 when the informant showed up on his doorstep twice in a 24-hour period.
The FBI, who declined to comment to the Times, shut down its investigation in January.
In the recent deposition, the informant admits that he never met Muhammad before picking him out of the 1998 photo lineup. He says he guessed at the correct photo because Muhammad had short hair in his picture, which seemed to match with his Islamic name.
Investigators have pursued various other theories, including one that the killing, and that of rap star Tupac Shakur in Las Vegas the year before, was the result of a feud between hip hop figures from the East and West coasts.
Shakur was the biggest West Coast hip hop star of his time, and he regularly exchanged insults and threats with Wallace, his East Coast counterpart.