Miller was offered a three-year deal worth $12 million by the Denver Nuggets, but instead opted for a two-year deal worth $5.5 million in which the veteran shooter has a player option following next season.
James actively recruited Miller, a close friend and Miami Heat teammate for three years, to Cleveland and a source told ESPN The Magazine's Chris Broussard that it was James' persistence that led Miller to choose Cleveland over other destinations.
Miller, 34, averaged 7.1 points per game this past season with the Memphis Grizzlies after spending the previous three seasons with James in Miami.
He is a career 41 percent 3-point shooter and will give the Cavs a much-needed perimeter shooter.
ESPN.com's Marc Stein reported Monday that Houston and Dallas had aggressively entered the bidding in hopes of swaying Miller from choosing Cleveland. But ultimately Miller couldn't resist the opportunity to reunite with James after Miami released him via the amnesty clause in July 2013, in a move which rankled Heat veterans.
Miller's signing is the Cavaliers' first since the franchise learned that James would return to Cleveland last Friday.
In addition to Miller, James is recruiting former Heat teammate Ray Allen to Cleveland as well. Allen is deciding between playing another season and retiring.