James has spoken with former Heat teammate and free-agent forward Mike Miller about joining him in Cleveland, a source told ESPN.com's Brian Windhorst.
James spent seven seasons with the Cavaliers, averaging 27.8 points, 7.2 rebounds and 6.9 assists and leading them in 2007 to the NBA Finals, where they lost to the Spurs. The goal for him now will be to get there again with a Cleveland team that boasts All-Star point guard Kyrie Irving and former Kansas star Andrew Wiggins, the No. 1 pick in last month's NBA draft.
Of Irving and James, Krzyzewski told Katz: "That will be a great, great duo ... LeBron is a brilliant player and Kyrie is really smart, two players with great knowledge of the game and understanding of the game."
James said he knows how hard it is to win a championship and that he is "realistic" about the team's hopes next season -- but optimistic.
"My patience will get tested. I know that," James said. "I'm going into a situation with a young team and a new coach. I will be the old head. But I get a thrill out of bringing a group together and helping them reach a place they didn't know they could go. I see myself as a mentor now and I'm excited to lead some of these talented young guys."
Las Vegas sports books quickly adjusted their odds to win the 2015 championship. The Las Vegas Superbook made the Cavs the outright favorites at 3-1, while dropping the Heat's odds all the way down to 100-1. The MGM moved the Cavs down to 7-2, co-favorites with the Spurs. William Hill and the Wynn sports books both moved the Cavs to 9-2.
Two months ago, the Cavaliers could be found as high as 60-1 to win the title, but money poured in over the last three weeks after James opted out of his contract with Miami. While the majority of wagers were small in size, the MGM, Nevada's largest sports book, told ESPN.com that it took a $1,000 bet on the Cavs at 40-1. Sports book operator CG Technology said it took "some higher dollar amounts from respected guys" on the Cavs at 30-1.
Information from ESPN.com's Darren Rovell and The Associated Press was used in this report.