Hull did start the brighter, but Danny Allsopp and Stuart Elliot could only shoot well off target from good positions in the opening minutes.
On 15 minutes, Lee Bullock wasted a great chance for the Minstermen when he shot well over the bar, and at the other end three minutes later, Ben Burgess' clever flick deserved much better than Allsopp blasting over from 12 yards.
After 26 minutes, Allsopp again sliced wide after receiving another good ball from Burgess.
Two minutes later, Boaz Myhill missed a York free-kick into the Tigers box causing a moment of panic, before Damien Delaney superbly blocked Dave Merris' shot when he looked certain to score in the box.
Moments later Hull went on the break with Allsopp beating the offside trap and slotting the ball to Elliot, who only had to shoot at an open goal but instead blasted over.
Five minutes before half time, Mitch Ward shot well wide for York.
Allsopp made the breakthrough for the Tigers on 57 minutes with his side's first shot on target through a cool tap-in past keeper Mark Ovendale from 12 yards.
After 64 minutes Stuart Green had a powerful shot saved, but two minutes later York were level after Lee Nogan bundled the ball in following a serious lapse of concentration in Hull's defence.
Despite the Tigers' dominance, their moments of complacency throughout meant this had always been on the cards.
After 72 minutes, Bullock missed a glorious chance to give York the lead after shooting wide when he had the goal at his mercy after a poor pass from Marc Joseph had put him clean through.
But three minutes later it was the Tigers who grabbed the chance to go in front when new signing Walters pounced in the area. Tigers were still living dangerously, though, as Andy Dawson kicked a shot off the line during another chaotic period in the Hull box.
In the dying seconds, Burgess ran clear and came close to scoring, but York will have gone home feeling they could have got so much more out of the game than they did.