I work a block away from corrado cutlery, downtown, 1/2 block south of City Hall. They have some production knives & a few custom knives, small sheath knives and nice ron Lake-sytyle interframe folders. The staff (at least one of the guys) is a knowledgeable knife-nut, fun to talk to. but they are pricey and don't have a large selection.
there is another place just west of The Loop, as central downtown is called, around 800 W. Lake, called I believe Northwestern Cutlery. (You can take the green line elevated train, or just walk under the elevated tracks on Lake Street from downtown, cross over the highway, look for the BBQ hovel on your left, then scope the small warehouses to your right). They have a really good selection of all kinds of production knives, and a staff that isn't super-knowledgeable but they are helpful & enthusiastic. Lots of fun toys to play with there!! They used to have a few custom knives, but not so much anymore. If you need kitchen knives, that is their specialty. They sharpen for professional cooks.
If you are going to be downtown, those are the 2 places I know of. Gun shops have knives too, but those bad bad establishments are forbidden in "the city that works." I'd suggest Northwest for a fun visit.
NOTE: While the Municipal Code of Chicago restricts carry-knife size to 2.5", 2.0" if 18 or under, that doesn't prevent knife shops from selling every type of knife (But as noted you should avoid carrying a "billy, dagger, stilletto or dirk," which the state dislikes but doesn't take the trouble to define).
