Knife Guy is the older brother of Grate Guy in Super Mario RPG: Legend of the Seven Stars. The two seemingly work as entertainers and bodyguards for Booster. When Booster (with Toadstool in tow) flees his tower, Mario and company chase after him. However, the heroes are ambushed on the balcony of the tower by Knife Guy and Grate Guy.
Knife Guy is not as dangerous as his partner Grate Guy, but still should not be underestimated. Each turn, he will either attack, or throw a knife that does 1.5x the damage of his normal attack to one character. The odds of each is 2/3 for the former, and 1/3 for the latter. At some point in the battle, he will call for a team-up, and will stand on Grate Guy's head. They are still considered separate targets during this time.
It is in this team-up phase that the battle's real difficulty lies: each turn, Knife Guy will either use Blizzard to damage the whole party, or Crystal to damage one character. The odds of each is 1/3 in favor of Blizzard, and 2/3 in favor of Crystal. While Blizzard does not have much power, especially backed by Knife Guy's somewhat low Magic Attack, the fact that Grate Guy will be using Meteor Blast every turn allows it to quickly wear out Mario's group. This phase's length is determined by a hidden counter, as well as Knife and Grate Guy's HP. Each time Knife Guy takes damage, the counter is increased by 1, and each time Knife Guy uses either of his spells, the counter is increased by 2. If either Knife or Grate Guy is defeated, or the counter reaches at least 5, they will separate and return to their first phase. The battle comes down to defeating one of them as quickly as possible, as neither Knife or Grate Guy are much of a threat on their own. Knife Guy should be eliminated first, to limit the number and duration of team-up phases. While Grate Guy will be a bother with his status attacks, Knife Guy has 200 less HP and is weak to Fire: if Mario has learned Super Flame, he can easily inflict a couple hundred damage to Knife Guy.
After their defeat, Knife Guy and Grate Guy decide to split up. Grate Guy opens his own casino near Bean Valley while Knife Guy stays at Booster Tower. Inside the tower, Knife Guy practices his juggling (trading in his knives for colored balls). If Mario returns to Booster Tower, Knife Guy will offer to play a game with him. The jester will juggle one yellow ball with a multitude of red balls; when he stops, Mario has to guess which hand the sole yellow ball is in. If Mario wins, he will be "rewarded" with a Moldy Mush, a Wilt Shroom, or a Rotten Mush, and sometimes a Mid Mushroom or Max Mushroom.
If Mario keeps playing, the game will get progressively more difficult. If Mario wins on the highest difficulty level, Knife Guy will give him the Bright Card needed to get into Grate Guy's Casino.