The 1994–95 NBA season was the Pacers’ 19th season in the National Basketball Association, and 28th season as a franchise. After appearing in their first Conference Finals, the Pacers improved their fortunes by adding point guard Mark Jackson, who was acquired from the Los Angeles Clippers during the off-season. The move would pay off as the Pacers got off to a solid 14–6 start, then went on a 7-game winning streak in February, as they won their first Division title since joining the NBA. The Pacers finished the season first place in the Central Division with a 52–30 record,Reggie Miller led the team with 19.6 points per game and 195 three-point field goals, and was named to the All-NBA Third Team, and selected for the 1995 NBA All-Star Game, which was his first All-Star appearance since 1990, while Rik Smits had a career year as he averaged 17.9 points and 7.7 rebounds per game. Small forward Derrick McKey provided the team with 13.3 points and 4.9 rebounds per game, and was named to the NBA All-Defensive Second Team, while Dale Davis contributed 10.6 points, 9.4 rebounds and 1.6 blocks per game, sixth man Byron Scott averaged 10.0 points per game off the bench, and Jackson led the team with 7.5 assists per game. Second-year forward Antonio Davis only played just 44 games due to a back injury.
In the playoffs, the Pacers faced off against the Atlanta Hawks for the second consecutive season. The Pacers swept the Hawks in three straight games in the Eastern Conference First Round. As they advanced to the Eastern Conference Semi-finals, the Pacers found themselves in a rematch with New York Knicks. As the Knicks had a better regular season record, the series started in New York. In Game 1, the Pacers were down 6 points with 16.4 seconds left. Miller would single-handedly stun the Knicks by nailing a 3-pointer and then stealing the inbounds pass and tying the game with another 3-pointer. Knicks fan and film director Spike Lee was just a few feet away. Miller would add 2 free throws and give the Pacers a legendary comeback win. The Pacers lost Game 2 and the series returned to Indiana. After four games, the Pacers took a 3–1 series lead. The Knicks would bounce back and force a 7th game at Madison Square Garden. The Pacers would emerge victorious with a 97–95 win as Patrick Ewing‘s last-second shot did not go in the basket.
With a 2-point win, the Pacers qualified for the Eastern Conference Finals for the second consecutive season. The Pacers were very familiar with their opponents. Like their first and second round opponents, the Pacers played the Orlando Magic the previous postseason. The Pacers pushed a strong Orlando team to a 7th game before losing the series. The home team would win every game in the series. Following the season, Scott left in the 1995 NBA Expansion Draft, long-time Pacers guard Vern Fleming signed as a free agent with the New Jersey Nets,Sam Mitchell re-signed with his former team, the Minnesota Timberwolves, and LaSalle Thompson was released to free agency.