James signed a two-year, $42.1 million contract with the Cavs on Saturday, a day after he announced he was returning to play in Cleveland and try to end the city's 50-year championship drought.
The deal provides flexibility for the NBA's biggest star with the league's maximum salary expected to rise in the future.
A person familiar with the negotiations said James' contract includes an option for the four-time league MVP to become a free agent next summer. However, it is strictly "a business deal," according to the person who spoke to The Associated Press on condition of anonymity because the team is not providing any details about the agreement.
By only signing for two years, James can get another contract with the Cavs before the 2016-17 season, when a new television deal is expected to push the maximum salary higher. The max contract for next season is $20.7 million. Until this deal, James had never been the highest paid player on his team in 11 seasons as a pro.
The Cavs did not provide any terms of the contract in a release, citing league policy.
James announced he was returning to the Cavaliers on Friday, picking Cleveland over Miami and reversing the decision he made four years ago to sign as a free agent with the Heat.
In an essay in Sports Illustrated, James indicated he will finish his career in Cleveland, and the Cavaliers are confident the Akron, Ohio, native is committed to them long-term.
"We could not be happier to welcome LeBron James home," Cavaliers general manager David Griffin said. "Yesterday, LeBron, through his essay, told us he wasn't going anywhere except Cleveland and that 'Cleveland is where he always believed he would finish his career.' These words and commitment put all of us, including LeBron, in the best position to build our franchise the right way and achieve the kind of goals we all know are possible. Expectations will be at the highest levels but no one should expect immediate and automatic success."
ESPN.com first reported the contract terms for James.
His decision to come back to his native Ohio was universally applauded. In the powerful essay on SI.com, the 29-year-old laid out his reasons for returning and said his relationship with Northeast Ohio "is bigger than basketball. I didn't realize that four years ago. I do now."
Griffin echoed those sentiments.
"LeBron's motivation to return home is clearly fueled by the kind of emotions and ideals that we can and should embrace," he said. "The contract and those details are secondary to his commitment to Northeast Ohio and the Cavaliers. It extends well beyond the boundaries of basketball and speak to his love and passion for his family, home, and our fans. He communicated his role and growth as a husband, father, teammate, community leader, and business person.
"This resonated in a special and personal way for all of us. LeBron put it well when he stated; 'In Northeast Ohio, nothing is given. Everything is earned.' We can't wait to get started and look forward to his leadership, on and off the court, for many years to come."
James spent his first seven seasons in the NBA with the Cavs, taking them to their first finals appearance in 2007. James is already the franchise leader in scoring (15,251 points), scoring average (27.8 PPG) field goals ((5,415), free throws made (3,650), steals (955) and minutes (22,119).
James is in Brazil to watch Sunday's World Cup final between Argentina and Germany.Suggest a correction