Hank Peters, general manager of the American League club, made the announcement after speaking by telephone with Knight's agent, George Kalafatis.
"I'll always have mixed emotions," Knight told reporters in Springfield, Mo., where he was attending a banquet. "I love the New York Mets, the organization is outstanding. But sometimes you have to move on for the betterment of your family. I have the chance to earn a two-year contract with Baltimore. The incentives are very fair. And, although it's not as much money, it's seemingly a more solid situation. I'll play everyday, and really that's all I had hoped for."
Knight, 34, hit .391 in the World Series, hitting a home run to drive in the winning run in the seventh game victory over the Boston Red Sox. But he never came close to reaching agreement on a new contract with the New York Mets.
The Mets offered a one-year deal worth $800,000, while Knight sought a two-year guaranteed contact worth $1.6 million.
Knight reportedly accepted $475,000, plus $125,000 in incentive bonuses from the Orioles.
An arbitrator has ruled in favor of the Red Sox in its salary dispute with pitcher Bruce Hurst.
Hurst, 28, was seeking $845,000 for the 1987 season, but the Red Sox offered $700,000. The arbitrator heard the case Monday in Chicago.
Hurst earned $475,000 in 1986 in helping the Red Sox to the American League pennant. He compiled a 13-8 record and a 2.99 earned run average in 25 starts last season, although he missed more than a month with a pulled groin muscle.
In the World Series, the left-hander defeated the New York Mets, 1-0, and, 4-2, before he tired and was replaced in the seventh game. He was not involved in the decision as the Mets beat Boston for the championship.
Relief ace Bruce Sutter of the Atlanta Braves is recovering from surgery to repair nerve damage to his right shoulder, officials at a Denver hospital said.
Sutter underwent the three-hour operation Tuesday at the University of Colorado Health Sciences Center and is listed in satisfactory condition, Dr. Steven Ringel said.
Sutter, 34, will not play baseball in 1987 but should be ready to play in 1988 if the surgery--the third attempt to repair his arm--is successful, Ringel said.