Knots are usually regarded as defects when grading lumber. In order to evaluate a member under out-of-plane loading, shear strength is one of the major mechanical properties, specifically, rolling shear (RS) strength is one of the critical mechanical properties of Cross-Laminated Timber (CLT), which determines the flexural strength of CLT under short-span bending loads. Lower grade lumber with a higher percentage of knots is recommended to be utilized for the cross-layer laminations which are mainly responsible for resisting shear stresses. Firstly, shear tests were performed in order to evaluate the effect of knots on longitudinal shear strength using shear blocks. After that, the effect of knots on the RS strength of 3-ply southern yellow pine CLT were investigated by experimental tests and an analytical model. Center-point bending tests with a span-to-depth ratio of 6 and two-plate shear tests with a loading angle of 14° were conducted on six CLT configurations composed of different types of cross layer laminations: clear flatsawn lumber with/without pith, lumber with sound knots with/without pith, and lumber with decayed knots with/without pith. The shear analogy method was implemented to evaluate the RS strength values from the bending test results, which were also compared against the results from the two-plate shear tests. It was found that: (1) The shear blocks containing sound knots had higher shear strength than matched clear shear blocks, the shear blocks containing unsound knots had lower shear strength than the matched clear shear blocks. (2) CLT specimens with cross-layer laminations with either sound knots or decayed knots had higher RS strength. (3) In general, the shear analogy method underestimated the RS strength of CLT specimens containing knots and pith.