There are various places to find a knife in Liberty City, but Niko can purchase one from the weapons shop. One of the earliest opportunities is to take the knife from Dardan, when Niko chases him and fights with him at the end of the mission Bleed Out. In the second encounter with serial killer Eddie Low is another oportunity to take one. If Niko does get into a fight with various gangster elements in, say, Hove Beach or Alderney City, they will often carry knives. If he defeats them, he can pick up a dropped knife.
You can find the knife in these locations:
Broker:
Rotterdam Hill - at the end of an alley, south of Brucie's pad, off Asparagus Ave.
Mohawk Avenue - behind Jermaine's apartment building (the guy that Niko picked up).
South Slopes - in an alley, south of Hickock Street.
Schottler - in an alley, north of Cayuga Avenue.
Bohan:
Road to Charge Island - on the off-ramp of the east Borough Bridge, past the toll booths (from Bohan towards Broker).
South Bohan - stuck in a tree, behind a fence off Attica Avenue.
Industrial - in the garage, to the south, near the pier and resting on a car body.
Northwood Heights Bridge - on the north pedestrian walkway.
Algonquin:
Middle Park West - next to the car park lot where Niko picks up the Infernus.
Middle Park - through nearly to the end of the underground area to the toilets.
Alderney:
Tudor - off the northbound on-ramp to the Plumbers Skway, by a disused building and railway tracks. (There is some scaffolding next to this which Niko can climb).
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