The Cubs will receive minor league outfielder Abner Abreu and right-handed pitcher Carlton Smith from the Indians.
"He did do some good things here and played a lot of times very solidly," Cubs general manager Jim Hendry said of Fukudome. "First year he made the All-Star Game in New York, but there were some tough times, too, and some bad endings in the first couple of years. He didn't play as well as we thought in the second halves.
"In a perfect world, we thought the bat would play on a little larger scale when we signed him. He's a very solid guy and good teammate. Wish him nothing but the best. It's a good thing for him, too, to showcase himself in a pennant race. Good guy and a good ending for everyone."
The Indians had been spurned in their attempt to land Carlos Beltran from the Mets.
"We're a better team than we were yesterday," Indians general manager Chris Antonetti said, less than 24 hours after the injury-depleted Indians were no-hit by Ervin Santana and the Angels in a 3-1 loss. "Kosuke helps us offensively and defensively. Our goal is to improve our run scoring and run prevention and we will continue to pursue all avenues."
The Cubs, who signed Fukudome to a four-year, $48 million contract before the 2008 season, will pay all but $775,000 of the $4.7 million owed to Fukudome for the rest of the season, sources told ESPN The Magazine's Buster Olney.
The 34-year-old Fukudome received the news shortly before the Cubs' game in Milwaukee against the Brewers. He left a closed-door meeting with Cubs manager Mike Quade, then shook hands or exchanged hugs with what were suddenly former teammates.
Through interpreter Hiro Aoyama, Fukudome said he knew little about Cleveland.
"Lake Erie is right next to it," he said. "I know it looks like Chicago."
Tyler Colvin was recalled from Triple-A Iowa and is expected to get most of the playing time in right field for the Cubs the rest of the season.
"We wanted to get Colvin up here and play," Hendry said. "Last year he played so well and he had such a solid year, 20 home runs in 358 at-bats. But he wasn't able to establish himself early in the year.
"This will give him a chance to rectify the beginning of the season."
Abreu, 21, is batting .244 with 12 home runs and 35 RBIs with 19 stolen bases at Class A Kingston. Smith, 25, is 2-3 with a 4.50 ERA and two saves in 34 games at Triple-A Columbus.
Fukudome is batting .273 with three home runs and 13 RBIs. In three-plus seasons with the Cubs, he batted .262.
Fukudome had a partial no-trade clause, precluding a trade to six teams, including the Indians. He said he was approached by the Cubs a couple of days ago about waiving the clause.
"It was a difficult decision to make," he said through an interpreter. "Not only because I was here a long time, but because it's a different league.
"My family said it was up to me, whatever decision [I] want to make."
Antonetti confirmed Fukudome changed his mind on going to Cleveland.
"He had a handful of teams listed and we were one of them," Antonetti said. "I think he realizes he is coming to a team with a chance to play in the postseason."
Outfielder Travis Buck was designated for assignment to clear roster room in Cleveland.
Cleveland trails first-place Detroit in the AL Central by two games, but has been hit hard with injuries. Outfielders Grady Sizemore and Shin-Soo Choo, two of the young team's proven players, are both on the disabled list until at least mid-August. Sizemore had hernia surgery and is rehabilitating a sore right knee. Choo is recovering from a broken left thumb.
Fukudome likely will see the most playing time in right field, then could shift to center when Choo returns. The Indians outfield is now laced with left-handed hitters, but Antonetti said he was more concerned with getting a solid player to help out rather than limit himself to acquire a much-needed right-hander to Cleveland's lefty-oriented lineup.
Two years ago, the Indians and Cubs completed a similar trade when Chicago sent veteran infielder Mark DeRosa to the Indians for three minor league pitchers. DeRosa suffered an injury, the Indians fell out of contention, and he was traded to St. Louis in a deal that brought Cleveland its current All-Star closer, Chris Perez.
Fukudome said his favorite Chicago memory was making the playoffs in 2008.
"The first year we were in the playoffs was something special," he said. "And for me, it was the first time I was in the United States and playing for a major league team. It was unfortunate that I couldn't help much."
Bruce Levine covers the Cubs for ESPNChicago.com and ESPN 1000. Information from The Associated Press was used in this report.