The Washington Bullets took a major step toward a playoff berth tonight by overcoming a 12-point deficit in the third quarter and pulling away to a 109-99 victory over the New York Knicks.

The Bullets' third victory in four games gave them the season series over the Knicks, 4-1, with one to play. That is the first step in any tie-breaking format for playoff position. Also, with Indiana losing at Atlanta tonight, the Bullets strengthened their hold on fifth place and moved within 1 1/2 games of idle New Jersey. They can further help themselves Sunday by beating Atlanta at Capital Centre (1:05, WTOP-1500).

Kevin Grevey scored 17 of his game-high 26 points in the second half to spark the rally, but it was dependable Greg Ballard who secured the victory with eight points in the final three minutes after the Knicks pulled within 98-95.

Ballard was struggling early, making only three of 10 shots in the first half, but when it counted, he was the one the Bullets went to in the stretch.

"Greg is a great late-game player," said John Lucas, who scored 19 points, one fewer than Ballard. "He's not afraid to take the big shot and he keeps moving to the open spot. Not all players do that."

The big play came when Lucas penetrated, but was stymied by 7-foot Marvin Webster. With the shot clock running down, Lucas whirled and passed back to Ballard at the top of the key. The veteran forward made his jumper to give the Bullets a 102-95 lead with 1:32 to play.

"That's the one we needed," Ballard said. "My shots weren't falling early, but I hung in there. I kept working hard on the boards and doing other things to help. At the end, I was ready."

But Ballard's late work might have been in vain if Grevey hadn't led the team in the decisive third quarter. He scored 14 points as the Bullets outscored the losers, 36-27, to take an 81-78 lead into the final period.

The Knicks scored 10 of the last 14 points of the second period, turning a 41-41 tie into a 51-45 lead. Paul Westphal, making his debut with New York, had eight of his 19 points in that spree.

Coach Red Holzman, sensing it was Westphal's night, started the second half with a three-guard offense. Westphal and Michael Ray Richardson were in the back court with Mike Newlin at small forward.

That combination put the Knicks ahead, 63-51, before Grevey put the Bullets back in the game.

The former all-America from Kentucky scored the Bullets' next 10 points, including back-to-back three-pointers to bring them within 65-61. After Charles Davis' 10-footer, Grevey scored four more.

It was Spencer Haywood's turn next. The former Knick, who had 21 points, made two base-line jumpers. The second put the Bullets in front, 75-74, with three minutes left. After Richardson's basket off an offensive rebound put the Knicks back on top, Jeff Ruland made four straight points and the Bullets were in front to stay.

"It was a strange kind of game," Coach Gene Shue of the Bullets said. "We had control early, then we went into a slump and couldn't buy a shot. Then we came back. We rebounded very well in the second half, particularly Ruland (11 rebounds). We were able to execute some plays when we had to and hit some big shots.

"We played good, aggressive defense when we had to," Shue said. (The Bullets yielded fewer than 100 points for the 28th time this season). "Now if we can just beat Atlanta, it will be a great weekend."

The addition of Westphal should help, but time is running out on their playoff hopes. New York is 29-36, three games behind the Bullets.

"Paul played very well for us," Holzman said. "He played longer (28 minutes) than I expected, however. He's in better shape than I thought. He should fit in very well with us."