James averaged 10.4 points and 3.8 assists and 20.9 minutes in 31 games this season, the 27-year-old former Eastern Arizona College player's first in the NBA. He started 10 games, but sat out two of the last four.
"We'd like to thank Mike for his contributions," Suns general manager Ryan McDonough told the Arizona Republic. "He made NBA history as the first two-way player to make a team's 15-man roster, while also establishing himself as a bona fide NBA player.
Canaan has averaged 13.0 points and 5.0 assists in four games.
"Isaiah Canaan has played very well for us since joining the team, and we needed to create a roster spot with Devin Booker and Davon Reed getting closer to returning," McDonough said.