The Pelicans waived small forward Alonzo Gee on Monday, ahead of the NBA's 5 p.m. ET deadline to trim rosters to their regular-season limit, clearing the way for Stephenson.
"It was a tough decision," Pelicans general manager Dell Demps said. "What it came down to was team need. We just felt with Lance's ability to play-make, especially with us without Tyreke [Evans] and Jrue [Holiday] to start the season, we felt like we had more of a need for a playmaker, which is why we elected to keep Lance."
Gee, who signed a guaranteed one-year deal with New Orleans this summer after opting out of the final year of his contract ahead of free agency, is owed approximately $1.4 million.
Asked if the money owed to Gee affected the team's thinking, Demps said, "We were doing what was best for the team. Obviously that comes into play, but this was a team decision, a basketball decision."
Stephenson split last season between the Clippers and Grizzlies after a subpar 2014-15 season in Charlotte led the Hornets to deal him to Los Angeles in the summer of 2015. Before training camp, he signed a one-year contract with the Pelicans for a veterans minimum $1.4 million with $100,000 guaranteed, league sources told ESPN's Marc Stein.
"I love the game, so I just want to play ball," Stephenson said. "For me to earn the spot, [I had] to go hard. I don't have to hide nothin'. I go hard. I try to prove that every practice, and I try proving it in the games. I just had to earn a spot. And it shows how confident I am in myself. I just try to come in every day and work hard."
The 26-year-old enjoyed a breakout season in Indiana in 2013-14, averaging 13.8 points, 7.2 rebounds and 4.6 assists per game in helping the 56-win Pacers advance to the Eastern Conference finals. But he left the Pacers in the summer of 2014 to sign a three-year, $27 million deal with Charlotte, only to last one season with the Hornets after it quickly became clear that he wasn't a fit there.
Stephenson said Monday that he is motivated to show that he has matured and to clear up misconceptions some may have of him from his six-year tenure in the NBA.
"It's like being a rookie again," he said. "Everybody got this image on me that's a straight lie. So I got to show the teams in person.
"Coming in my rookie year, you think you're 'the guy,' because you grew up and you were that guy since you were young. Coming into the NBA, everybody is similar to you. Of course I had a big head when I came into the NBA. Now that I'm older and I learned the game a little bit more, I know how you control that and know how to show that I'm working hard more than coming in and thinking 'I'm that guy.'"
Stephenson averaged 6.8 points, 3.7 assists and 3.3 rebounds in 23.8 minutes per game in the preseason for New Orleans.
"I think that he has the ability to play multiple positions," coach Alvin Gentry said. "He's a good ball handler. He's a good facilitator. If you have those three skills, you can step in and help a bunch of teams."