James tallied 41 points, 13 rebounds and 12 assists for the Cavaliers, who seized a 3-0 lead in the best of seven Eastern Conference first-round series.
The Cavaliers were down by 25 points at halftime and as much as 26 at one point in the contest. They are the first playoff team in history to erase a 25-point halftime deficit and win.
LeBron passes Kobe on playoff scoring list
James passed Kobe Bryant for number three on the league's career playoff scoring list and tied another NBA record by winning his 20th consecutive first-round game.
James delivered 28 second-half points as he took over the contest in the fourth quarter in front of a crowd of 18,100 at Bankers Life Fieldhouse arena.
"They came out and jumped on us in the first half, but when we came into the locker room at halftime, I told the guys, 'Let's just get a couple of stops and see what happens,'" James said.
"Then we took the ball right at them and got back in the game. We got some great play from our guys off the bench."
The 26-point comeback ties for the third largest in league playoff history and is the largest since 2012, when the Los Angeles Clippers came back from a 27-point deficit to beat the Memphis Grizzlies.
A game of two halves
The Cavaliers scored 70 points to just 40 for the Pacers in the second half. Kevin Love, J.R. Smith, Kyrie Irving and Channing Frye each scored 13 points for Cleveland while Kyle Korver added 12.
Pacers forward Paul George scored 36 points, including 21 alone in the second quarter. But George couldn't keep pace with James and Cavaliers over the last two quarters.
Jeff Teague added 15 for Indiana, and Lance Stephenson scored 13 for the Pacers. George also finished with 15 rebounds and nine assists.
Indiana led by 10 after one quarter. They built a 50-36 lead with just under six minutes left in the second quarter and went on to lead 74-49 at the half.
This is only the second time in Pacers' franchise history that Indiana has trailed a playoff series 3-0 and George said it is in part because of poor communication.
Paul George not happy
"We came out in the second half with a 25-point lead and had a chance to put our foot on their throat," said George. "Instead, we came out relaxed and just allowed them to step into wide-open three-pointers.
"We played a great first half, but then they really got aggressive in the second half. We have to do a better job communicating."
Grizzlies make a contest of Spurs series
In Memphis, guard Mike Conley scored 24 points and added eight assists as the Memphis Grizzlies defeated the San Antonio Spurs 105-94 to get back into their series.
The Spurs lead 2-1. Their loss snapped a streak of 10 consecutive playoff wins over the Grizzlies.
Conley got most of his help from forward Zach Randolph (21 points, eight rebounds) and center Marc Gasol (21 points, six rebounds and three assists).
Leading by four at halftime, the Grizzlies outscored the Spurs 31-17 in the third quarter and were up 81-63 entering the fourth.
San Antonio coach Gregg Popovich pulled his starters early in the fourth quarter, and most did not return as Memphis stretched its lead to as much as 22 points.
Bucks take series lead against Raptors
Elsewhere, Khris Middleton scored 20 points, Giannis Antetokounmpo added 19, and Milwaukee's defense did the rest as the Bucks eased past the Toronto Raptors 104-77.
The Bucks grabbed a 2-1 lead in the first-round Eastern Conference series.
DeRozan missed all eight of his shots from the floor and finished with eight points, while the Raptors shot just 33 percent from the floor and went six-for-22 from three-point range.
Kyle Lowry and Delon Wright led Toronto with 13 points apiece.
Follow Game 1 NBA Finals 2017 live online: Cavs @ Warriors