In exchange for the four-times NBA champion, the Suns will also receive a second round draft pick in 2010 and cash considerations.
The deal pairs the 37-year-old O`Neal with reigning most valuable player LeBron James, the dynamic forward who averaged an NBA second-best 28.4 points per game this season.
Cleveland had the league`s best record at 66-16 but lacked a dominating inside presence and lost to the Orlando Magic in the Eastern Conference finals in six games.
The Suns were in a similar position last season when they acquired O`Neal from the Miami Heat, feeling they were just one piece away from their first NBA title.
But the Suns lost in the first round of the playoffs last year after finishing 55-27 and stumbled to 46-36 this season and failed to qualify for the postseason.
O`Neal, the NBA`s fifth all-time scorer with 27,619 points during a 17-year career, averaged 16.5 points, 9.0 rebounds and 1.38 blocks during one-plus seasons in Phoenix.
The 7-foot-1, 325-pound (147 kg) two-times NBA scoring champion is not the dominant player he was when he was selected by the Orlando Magic with top pick in the 1992 draft.
But at this stage of his career, he can still be a force inside and just four seasons ago helped the Miami Heat win their first championship.
Wallace, 34, will replace O`Neal in the paint for the Suns but the best days for the four-times NBA Defensive Player of the Year are behind him.
He was a credible presence defensively for the Cavaliers but averaged only 2.9 points per game this year and shot an anemic 42 percent from the free-throw line.
Pavlovic, 25, was originally selected by the Utah Jazz in the first round of the 2003 NBA Draft and has averaged 5.8 points over his career.
(Writing by Steve Ginsburg in New York; Editing by Alison Wildey)
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