The 24-year-old pipped his rival Jahmene Douglas to take home the crown and land a lucrative record deal on Sunday's glittering final, which featured performances by Rihanna and Emeli Sande.
'X Factor' winner: James Arthur
Now James' career is set to take-off - he's heading into the studio with Sheeran, who wrote One Direction's latest hit, Little Things.
Sheeran has told Arthur: "Well done. Let's get into the studio together as soon as the show's done," while a source added to The Sun: "Ed sees some of himself in James. He likes his style and is convinced a collaboration would be a big hit."
James' mentor Nicole Scherzinger is also desperate to work with Arthur, who she has described as "a fighter" after he used to sleep rough on the streets when he was 15.
Ed Sheeran wants to work with James
She said: "He wanted this, he willed this to happen. He deserves this so much."
James insisted: "It's mad that all these incredibly talented people think I'm worthy of working with. This time last year I was going nowhere - and now my phone is buzzing with texts from artists I admire."