NBA: Thomas heading to Lakers after Cavs ring changes
Crucially, the trade frees up salary space for the Lakers which could enable them to pursue a blockbuster deal for James, who will enter free agency in the summer.
Oklahoma City Thunder forward Paul George is also a Lakers target that could now be viable with the additional salary cap space.
Lakers president Earvin "Magic" Johnson told reporters the deal was an important step on the team's rebuilding journey.
"Hey, we had to do this deal for now and the future of the Lakers," Johnson said.
"I came here to create flexibility for our organisation so one day we can have a superstar come here with our young core," he added.
Thomas joined the Cavs last year as part of the move which sent Kyrie Irving to the Boston Celtics.
However the playmaker has been unable to settle in Cleveland, missing the first two months of the season with a hip injury.
"I'm tired of being traded," Thomas said following the Cavs' win over Minnesota. "That's not a good thing. But I just want to be where I'm wanted. I like it here. It hasn't been as planned, but I definitely want to be here.
"We have a real chance to win an NBA championship, and I want to be a part of that." Thomas is now expected to form a partnership with rookie Lonzo Ball in the backcourt, despite the fact they both play at point guard.
The Cavs also brought in Rodney Hood (Utah Jazz) and George Hill from the (Sacramento Kings), while sending Joe Johnson and Iman Shumpert to Sacramento.
Jae Crowder and Derrick Rose were also sent to Utah as the Cavs dramatically reshaped their roster in a bid to kick-start a season which has seen them fall away at the top of the Eastern Conference.
Whether the restructuring is enough to persuade James to remain in Cleveland however is an open question.
"This trade is also a reflection of our continuing commitment to invest in our roster in ways that help us evolve and compete at the highest level now and into the future," Altman said.