The Lakers succumbed to only their second loss in eight games with Nikola Vucevic posting an impressive 36 points for Magic.
The loss leaves the Lakers just outside of the play-off places in the Western Conference, with an 8-7 record.
Despite an impressive opening quarter in which they attained a six-point lead, the Lakers crumbled in the middle stages of the match.
James typically led the Lakers’ scoring with 22 points but a lack of defensive cohesion ultimately cost the team.
Point guard Rajon Rondo broke his hand earlier in the week during the 126-117 win over the Portland Trail Blazers.
It is expected the veteran playmaker will miss three weeks of action during which the Lakers have some favourable fixtures.
Rondo has been an important cog in the team so far this season, running plays and popping up with near to double figures each game.
When asked after the Magic loss where the team missed Rondo, James replied: “In the second line-up. We’ve had such a great run.
“Our rotation, we lose that a bit [without Rondo].
“A lot of guys are going into positions they haven’t been into the last five or six games.”
Speaking about the defeat as a whole, James labelled the performance “uncharacteristic”.
“After the first quarter we were pretty bad,” the 33-year-old admitted.
“Defensively we had a lot of breakdowns, which is uncharacteristic of us as of late.
“We give Orlando credit, they got into positions where they just got the better of us, being in the right spots at the right time.
“Orlando have been playing well at home, scoring a lot of points, and we just didn’t have our defensive keys down like we have the last few games.”