Knight ran over Carter after a fistfight with Compton consultant Cle "Bone" Sloan, whom he also clipped with his truck.
Although Knight reportedly counted Carter as a friend, prosecutors contended the collision was deliberate.
Knight, centre, turned himself in at the Los Angeles County Sheriff's department in 2015 in connection with the hit-and-run incident that left one man dead and another injured.
According to prosecutors, Knight proceeded to follow the men to a nearby burger restaurant, where he ran over them with his auto. His no contest plea came days before his trial was scheduled to begin on Monday (September 24).
TMZ reports that the former Death Row exec pleaded no contest to voluntary manslaughter.
Knight, co-founder of influential hip-hop label Death Row Records, entered the plea ahead of his scheduled trial on murder charges stemming from accusations that he ran down two men with his pickup truck near a burger stand in the Los Angeles suburb of Compton on January 29, 2015.
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The vehicle is then seen zooming forward, back into camera range, running over Sloan a second time, and then running over a second man, Carter, a former rap music label owner.
Knight's lawyers maintain he was acting in self-defence as he fled armed attackers when he ran over Mr Carter and Mr Sloan.
Knight, who was incarcerated at the time, was named by police a few years later as a suspect in the Wallace slaying but was never charged.
The rap mogul, whose label once listed Dr Dre, Tupac Shakur and Snoop Dogg, pleaded no contest to voluntary manslaughter in exchange for the prison term. Knight lost control of the company after it was forced into bankruptcy.
The agreement means prosecutors will recommend he serve 28 years behind bars.
In 1997, he was sentenced to nine years in prison after violating his probation stemming from an earlier assault charge.