The letter, in which the notorious outlaw professed his innocence, is offered as part of Bonham's upcoming Fine Books and Manuscripts sale in New York.
Jesse W. James wrote this heated letter on June 5, 1875, in response to a certain Mr. Flood, who had accused the outlaw and his brother Frank of stealing a horse from Dr. William J. Yates.
He was demanding Flood to retract his accusations, also asking him to "go to my Mother & explain why you sed what you did" in the light of the James' connection with Dr. Yates.
The Old West outlaw had long felt a debt of gratitude towards the doctor, who was one of the first to arrive after his family's farm in Kearney, Missouri was raided by Pinkerton agents on January 25, 1875.
During the tragic attack, James' mother, Zerelda Samuel, lost her right arm and his half-brother Archie was killed at the age of nine.
"Do you suppose if we were thieves we would Steal a horse from one that has been so kind to Mother as Dr Yates has far from it… and they are no men in Mo. who scurn horse thieves more than we do," the notorious bank robber wrote.
He menacingly added "if you value your life you had better retrace your Slander," before signing "Jesse W. James."
This handwritten letter is estimated to sell for between $200,000 and $300,000, due to its extreme rarity on the market.
Indeed, only three similar letters are known to exist outside the collection of James's descendants.
A six-page handwritten letter by James, which was addressed to his stepfather Dr. Reuben Samuel, fetched $175,000 at Christie's New York in 2004.
The letter being auctioned off at Bonhams will be offered on October 23 during the house's Fine Books and Manuscripts sale, alongside the autograph collection from the Dodge Family.
Among the most coveted lots is a rare handwritten letter by English novelist Jane Austen, which she wrote to her sister Cassandra.
The piece is expected to fetch between $80,000 and $120,000, with Bonhams pointing out that Austen letters seldom appear at auction.