The Rockets took less than 24 hours to make the move, leaving Charlotte still searching for frontcourt depth before the start of training camp next week.
"We obviously thought it was a good opportunity to get the guy," Bobcats general manager Rod Higgins said. "But it's part of the business."
The 6-foot-9 Landry had been unable to reach terms with Houston since free agency began this summer. His agent threatened that Landry could sign with an overseas team as the two sides haggled over money.
The Bobcats stepped in with an offer Wednesday. But even with decent depth up front, Houston decided to keep Landry, who can play power forward and center.
Houston acquired the second-round pick in a draft-night trade with Seattle last year. Landry averaged 8.1 points and 4.9 rebounds in 42 games.
"We're really excited to have him back," Rockets general manager Daryl Morey said. "We're going to have a great set of players in for training camp."
Landry's playing time increased late in his rookie season after Rockets center Yao Ming was lost to injury. He scored 22 points in a game at Indiana and was voted to the all-rookie second team.
Landry missed time late last season because of a bruised right knee, and Morey said the former Purdue star will undergo a physical. Morey said the Rockets are willing to take a chance with Landry's health.
"We've got a good sense of the state of the knee," Morey said. "We feel like we're in a season where we've got to take risks and we've got to bring in all the best players possible. We feel like this has a chance to be a special season and we're excited Carl will be a part of it."
Landry declared himself 100 percent healthy and said he feels better than he was before the injury.
"I would say getting drafted was the best day ever in my life and signing this contract will have to be second," Landry told Houston TV station KRIV. "I am happy to be back in Houston."
"We'll continue to look for ways to improve, that never changes," Higgins said.
Some help could come from injury-riddled forward Sean May. Higgins said May should be close to full strength when new coach Larry Brown opens training camp. May missed all of last season after undergoing microfracture knee surgery.
"Sean is working out and is starting to look comfortable out there," Higgins said. "He'll be ready to start on Tuesday."