Everton and Tottenham Hotspur were interested in securing the services of James. However, the Cottagers will be taking him temporarily this summer.
It is unclear whether there is an option or obligation to buy clause.
The 24-year-old will join the London club, who are desperately looking for cover for new signing Manor Solomon. The Israeli international picked up a long-term injury in his first appearance for the club.
Fulham were close to signing AS Roma attacker Justin Kluivert, but the deal broke down after the FA refused to grant the player a work permit.
Leeds have now turned their attention to former Manchester United and Swansea attacker James. The speedster scored four goals and assisted four last season, helping Jesse Marsch’s side escape relegation.
He has started two and made one substitute appearance in Leeds’ opening four Premier League games. However, he could leave with the club chasing Olympique de Marseille’s Bamba Dieng.
James can fill in on both flanks at Fulham. The Wales international would give Marco Silva added pace in attack around Aleksandar Mitrovic.
Fulham have started the season well with two wins, two draws and one loss in their five Premier League games.
Star man Mitrovic is lighting up the Premier League with five goals from five games.
They have added quality to their side with Solomon, Issa Diop, Shane Duffy, Joao Palhinha, Kevin Mbabu, Andreas Pereira and Bernd Leno.
They are also close to completing deals for Paris Saint-Germain’s Layvin Kurzawa, free agent Willian and James.
Fulham will hope his addition will give them firepower to avoid another relegation.
They will want stability after five successive seasons of bouncing between the Premier League and Championship.
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