James' agent and CEO of Klutch Sports, Rich Paul, first told The Athletic's Shams Charania about the new contract, as well as confirming the agreement to multiple outlets on Wednesday.
The deal sees him remain a Laker until the end of the 2022-23 season, and opens up the possibility of playing in the NBA at the same time as his son, Bronny.
James' current deal had been set to expire at the end of the 2021-22 season. As part of the new deal, James is set to earn $41 million in the first year of the extension, before he earns $44.5 million in the final year of his contract.
At the age of 38, he will become a free agent again in 2023 -- the same year his eldest son Bronny graduates from high school.
Last year, NBA commissioner Adam Silver opened up the possibility to go straight from high school to the NBA -- like James did back in 2003 -- rather than attend college or play in a foreign league first.
Earlier this year, Silver doubled down on this plan, saying: "We haven't made it a secret recently it is our intention, although we still need to work out the details with the players association, to return to an entry age of 18."
In 2018, James indicated he wanted to play with his son, saying, "If I'm on the same court as my son in the NBA. That would be No. 1 in my lifetime as an NBA player. I've thought about it because my son is about to be 14, and he might be able to get in there a little earlier."
Bronny James is currently a sophomore at Sierra Canyon high school in Los Angeles, and is considered to be one of the best high school basketball prospects in the country.
Elsewhere in the NBA, another family has had their dream come true, as all three Ball brothers now have contracts with NBA teams.
The eldest and youngest brothers have had more high profile entries into the league with Lonzo chosen second overall by the Lakers in the 2017 NBA Draft and LaMelo chosen third overall by the Charlotte Hornet's in this year's draft. Lonzo has since been traded to the New Orleans Pelicans.
LiAngelo has had a more tumultuous journey to the NBA than his brothers.
During his time at UCLA, he and two other teammates were arrested days before the 2017 season-opener in China and were questioned about shoplifting sunglasses from a Louis Vuitton store, and UCLA Athletic Director Dan Guerrero confirmed the trio shoplifted from three stores near their hotel.
Potentially faced prison time, US President Donald Trump intervened and asked Chinese President Xi Jinping to help, with the charges eventually dropped.
If two Ball brothers were to play on the same roster, and faced the third brother, they could emulate the Holiday brothers. In December 2019, the Holidays became the first trio of brothers to play in the same game in league history.
Westbrook moves again
Meanwhile, after reportedly demanding a trade away from the Houston Rockets after just one season, Russell Westbrook has got what he wants.
The highest profile trade of this year's offseason sees 2017 NBA MVP Westbrook sent to the Washington Wizards in return for 2010 first overall pick John Wall along with a lottery-protected first-round draft pick.
Like Westbrook, Wall had reportedly also wanted out of his team. Wall leaves Washington after 10 years in which the team made the playoffs just four times, and never made it further than the second round.
The upheaval in Houston may not be over just yet.
The 2018 NBA MVP James Harden has also privately asked for a trade, but it is hoped the addition of Wall may entice him to stay with the team. According to ESPN's Adrian Wojnarowski, Harden desires a trade to the Brooklyn Nets where he could play alongside perennial All-Stars Kevin Durant and Kyrie Irving.