The Raptors sent centre Hamed Haddadi — who never played for Toronto — and a conditional second-round pick to the Suns.
The deal gives Toronto a third point guard, joining Kyle Lowry and John Lucas. Raptors head coach Dwane Casey had expressed a desire for a veteran points guard in the days leading up to the trade deadline.
Lucas is shooting 52 per cent while Telfair has struggled this season, shooting just 38 per cent.
The 27-year-old Telfair is averaging 6.0 points and 2.5 assists this season. He has played in 535 games over nine seasons.
The Raptors will be Telfair's seventh NBA team in that span.
Telfair was selected out of high school by the Portland Blazers with the 13th overall pick in 2004.
Haddadi was part of the deal that sent Jose Calderon to Detroit and Ed Davis to Memphis in exchange for Rudy Gay.