Kyrie Irving scored 29 points and Indiana native Tyler Zeller had 18 before fouling out midway through the fourth quarter for Cleveland, which allowed the Pacers to break off a 25-4 run in the fourth for a 93-92 lead.
Irving hit two free throws to put Cleveland up 94-93, but George knocked down a 3-pointer with 29.9 seconds left to put the Pacers back in front. Jeff Pendergraph then drew a charge on Irving on the ensuing possession and Indiana held on.
The Pacers came to life after coach Frank Vogel was ejected in the third quarter for arguing with officials.
"When coach went out, we really had to pull it together," George said. "We knew the fourth quarter is the way we play. We were really struggling.
"We couldn't have three blowouts in a row. We want to close the season out on a good foot."
Irving and Zeller kept the Cavs alive in the first quarter after the Pacers jumped out to a 20-8 lead. Zeller hit three jumpers from the right elbow and finished the quarter with 14 points -- nearly double his season average.
The Cavs cut the lead to 29-26 after the first 12 minutes.
Indiana's defense struggled for the third consecutive game before picking it up in the fourth.
"We just gave a couple of shots to them," Cavs coach Byron Scott said. "Transition defense, I think they average 11 for the season and they had 33 tonight. That's the game, simple as that.
"It seems like (we let up). You would think after three times we'd learn, after two times really. But obviously we didn't."
The Cavs led 53-48 at halftime while shooting 51.1 percent from the field and despite just two free throw attempts in the half.
The Pacers shot 31.6 percent from the field in the second quarter and 38.1 percent in the opening half. They ended the first quarter with a shot clock violation and added two more in the first 2:14 of the second. Indiana had five violations in the game.
"That was a crazy one," Vogel said. "Proud of my coaching staff for pulling out the win and pulling the right strings."
Indiana was outscored 31-16 in the third quarter.
The victory snapped a two-game losing streak for the Pacers. ... Cleveland came in ranked 29th in the league NBA in field goal percentage.
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INDIANAPOLIS, IN - APRIL 8: Paul George #24 of the Indiana Pacers drives to the hoop against the Cleveland...
MVP: George Hill. He was the lone Pacer who showed any urgency as the Cavaliers started to pull away. And after starting the fourth quarter down 20, it was his three-point play in transition that gave Indiana a one-point lead with 46 seconds to play.
X-Factor: Jeff Pendergraph. The seldom-used forward played eight minutes in the fourth, and his pick-and-roll defense stalled the Cavaliers' attack enough for the Pacers to come back. The charge he drew on a would-be three-point play by Kyrie Irving was the game's biggest moment.
That was ... strange. Cleveland trailed 20-8 then outscored the Pacers 76-44 before losing the fourth quarter 35-10. They say basketball is a game of runs, but this was ridiculous.
The Pacers outscored the Cavaliers 35-10 in the fourth quarter Tuesday to erase a 20-point deficit. Indiana scored 16 of its 30 transition points in the fourth quarter, while holding the Cavaliers to zero transition points in the final period.