LaMarcus Aldridge had 22 points and 10 rebounds and Nicolas Batum added 18 points for Portland, where Felton drew the ire of fans during a disappointing stint last season.
J.R. Smith had 33 points and Kenyon Martin added 12 to lead New York, which went ice cold in second half, shooting just 33 percent. The Knicks lead the Atlantic Division but have lost three straight after a rash of injuries that has decimated their starting five.
Tyson Chandler suffered a bruised knee in a collision Wednesday at Denver and was unavailable. Leading scorer Carmelo Anthony returned to New York to have his right knee drained after leaving Wednesday's game early. Amare Stoudemire is expected to miss at least six weeks after having knee surgery on Tuesday.
The game marked the return of Felton to Portland, where he was roundly criticized for starting the season out of shape and then playing well below expectations. He fanned the flames earlier in the week by telling Newsday about his return: "There are certain people there I don't want to see and better not come near me." Portland fans booed Felton when he was introduced and then each time he touched the ball. He finished with 11 points on 4-of-12 shooting.
The Blazers drafted Lillard with the sixth
The rise of Lillard has been the brightest development for the still-developing Blazers, who have steadily slid out of playoff contention with losses in 11 of their last 15 entering the game.
New York shot 58 percent from the field in the first half and led for most of it. Marcus Camby's layup gave the Knicks 41-28 lead midway through the second quarter. However, the Blazers put together a charge just before halftime, ending the half with a 13-0 run to go into the break with a 51-48 advantage.
Portland kept the momentum in the third, going up 64-54 on Lillard's driving layup. Portland led 78-62 after three quarters as the Knicks went 5 of 27 from the field in the quarter.
Smith had 18 in the fourth for the Knicks, who got within 80-76, but the Blazers regained control with a 15-2 rum.
NOTES: Aldridge was playing with a lingering ankle sprain and a swollen left hand, which he injured Tuesday against Memphis. . Portland has won 10 of its last 12 over the Knicks at home. . New York is in the midst of a five-game West Coast trip that hasn't started well. The Knicks were blown out by 29 at Golden State and then lost 117-94 to the Nuggets.