The deal was announced Tuesday, one day after the sides reached agreement. It includes $2.9 million in performance bonuses.
Ibanez is a 39-year-old outfielder who played with Philadelphia the previous three seasons and hit .245 last year with 20 homers and 84 RBIs. He is expected to become the Yankees' main designated hitter against right-handed starters.
In addition, the Yankees reached a preliminary agreement on a $900,000, one-year contract with backup infielder Eric Chavez, who hit .263 with two homers and 26 RBIs last year for New York. The six-time Gold Glove winner broke a bone in his left foot on May 5 after just 17 games and didn't return until July 26.
His deal is subject to a physical.