James, a 27-year-old rookie, is the first two-way player to have his deal converted in this manner. Two-way deals -- which allow for a combined NBA and G-League affiliate contract -- were introduced into the NBA this season as part of the NBA's new collective bargaining agreement.
The Suns plan to create a roster spot for James on Thursday morning, league sources said. Barring a trade, the Suns could choose to waive forward Derrick Jones Jr.
Two-way contracts are paid on a smaller scale, and James will have exhausted his 45 days on an NBA roster on Thursday, which is counted from the first day of G-League training camp. James made a projected $213,000 on the two-way contract, and he could make $580,607 on a minimum NBA contract for the balance of the 2017-18 season.
James has averaged 10.5 points and 4.5 assists for the Suns in 21.8 minutes a game.
James had spent the past years playing overseas, including stops in Croatia, Israel, Spain and Greece. After attending Eastern Arizona and Lamar, he was undrafted out of college.
ESPN's front-office insider Bobby Marks contributed to this report.