Police said the founder of bankrupt Death Row Records was arrested about 6:40 a.m. after officers arrived at the scene of a minor traffic accident and found Knight hitting a woman in a parking lot off a busy thoroughfare.
"A citizen sees the beating in a parking lot, police get there fast, they see him beating her. It's a good solid case," said Las Vegas police Lt. Chris Carroll.
The woman was not stabbed but she was treated at a hospital for injuries that Carroll said were not life-threatening.
Police did not release the woman's name or age, but said she identified herself as Knight's girlfriend of three years.
"This is a very large man," Carroll said, estimating his weight at more than twice the woman's. "He was on top of her, actually in the act of violently beating her when the officers arrived, with the knife in his hand."
At least one officer drew a Taser stun gun as they approached Knight, said Officer Jacinto Rivera, a police spokesman. He said he did not know if the officers drew their handguns.
Knight dropped the folding knife and was taken into custody without incident, Carroll said.
He was booked into the Clark County jail on felony charges of assault with a deadly weapon and possession of a controlled substance, and misdemeanor charges of possession of dangerous drugs without a prescription and domestic violence.
Knight had the drugs Ecstasy and hydrocodone when he was arrested, Carroll said, but it was not clear if he or the woman had used drugs or alcohol before the arrest.
Lawyers David Chesnoff and Richard Schonfeld, who are representing Knight, said they wanted to gather information about the arrest and talk with Knight before commenting.
Rivera said Knight and the woman left a Las Vegas strip club, Spearmint Rhino, shortly before the arrest. They were alone in a champagne-colored Cadillac Escalade.
Police said Knight and the woman argued in the vehicle while Knight was driving before he allegedly punched her in the head.
"The victim purposely grabbed the steering wheel and caused the vehicle to hit the curb," police said in a statement. Police said the woman tried to run away, but Knight caught her.
Knight has a history of legal problems and was with Tupac Shakur when the rapper was gunned down in Las Vegas in 1996.
Knight was convicted of assault in 1992 and placed on probation, then jailed for five years in 1996 for violating that probation.
He was returned to jail in 2003 for again violating parole for punching a parking attendant at a Hollywood nightclub. He was released the next year.
Knight was wounded during a shooting at a party in a Miami nightclub in August 2005.
His former record company was auctioned in June for $24 million to New York-based Global Music Group Inc.
Daniel McCarthy, a lawyer handling a Chapter 11 bankruptcy protection filing for Knight and the record company, said Wednesday that the sale is pending.
Death Row Records was known for releasing seminal gangster rap albums by Tupac Shakur, Dr. Dre and Snoop Dogg, and sold tens of millions of albums in the heyday of early 1990s rap.
In 2006, a federal judge ordered a bankruptcy trustee takeover of Death Row Records, saying the label had undergone gross mismanagement. Knight's decision to file for bankruptcy protection staved off a move by the court to appoint someone to take control of the record label and his assets.