In the years following their 1998 first-round playoff loss to the Indiana Pacers, the Cavaliers dropped to the bottom of the league and became a perennial entrant in the annual NBA Draft Lottery. The franchise's freefall bottomed out during the 2002–03 season, as the Cavs fell to a 17–65 record, tied with the Denver Nuggets for the league's worst.

However, the fortunes of the franchise shifted dramatically in May 2003, when the Cavs won the first overall pick in the draft lottery. The Cavaliers selected high school phenomenon LeBron James from St. Vincent-St. Mary High School in nearby Akron, providing the team with a centerpiece player around which to build.

The Cavs revised their look for the 2003–04 season, introducing a new logo and a variation on the wine and gold color scheme used by the club during the 1970s. Dark blue was also added as a trim color.

The team made major moves during the season, trading Ricky Davis, Chris Mihm, Michael Stewart and a second-round draft pick to the Boston Celtics in exchange for Eric Williams, Tony Battie, and Kedrick Brown. Later, Darius Miles was traded to the Portland Trail Blazers for Jeff McInnis and Ruben Boumtje Boumtje.

The Cavaliers finished fifth in the Central Division with a 35–47 record. However, they fell just one game short of making the playoffs. James was named Rookie of The Year. Following the season, Carlos Boozer signed as a free agent with the Utah Jazz.

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