The 30-year-old forward, a four-time NBA Most Valuable Player, has agreed a deal worth $23m, according to media reports in the US on Thursday.
He also holds a player option for 2016-17 which would increase his contract to a maximum of $46.9 m spread over two years, CNBC claims.
James, who led the injury-hit Cavaliers to last season’s NBA Finals where they lost 4-2 to the Golden State Warriors, opted out of a two-year deal on June 29 to reach free agency.
Cleveland fans can now look forward to the return of their illustrious ‘Big Three’ with All-Star forward Kevin Love and point guard Kyrie Irving having both agreed to maximum contracts.
Love, who missed the NBA Finals after dislocating his shoulder, said on Thursday his deal was “inked and official” after he had sought the advice of James once free agency opened.
“LeBron happened to be in Los Angeles the same time I was and we agreed on a lot of things,”Love said.
“I expressed this to LeBron; I can actually go wherever I want and pick the team I want to play for. But every time I went through the different scenarios I always came out at the same place; to be in Cleveland and try to win championships.
“I would be able to really help this team win and going forward make a very big impact on this team and on this city, trying to bring home a championship or championships.”
James spent seven years with Cleveland until he joined Miami Heat in 2010, before re-joining the Cavaliers in 2014.