Two people familiar with the negotiations disclosed the agreement, which is subject to a physical. They spoke to The Associated Press on condition of anonymity because the deal was not yet final.
Teixeira's deal, which includes a signing bonus of about $5 million and a complete no-trade provision, raises the Yankees' offseason spending spree to $423.5 million. Just last Thursday, the Yankees completed agreements with two highly prized pitchers, giving CC Sabathia a $161 million, seven-year contract and A.J. Burnett an $82.5 million, five-year deal.
Preparing to move into their pricey new ballpark, the Yankees will hold the four largest contracts in the sport as they try to win the World Series for the first time since 2000. Third baseman Alex Rodriguez has baseball's highest deal at $275 million over 10 years, and shortstop Derek Jeter is second at $189 million over 10 years.
Teixeira's agreement came just one day after the Yankees received a $26.9 million luxury tax bill for 2008, when their streak of 13 consecutive playoff appearances ended. But with the revenue from their new stadium, where tickets are priced at up to $2,500 per game, their appetite for free agents wasn't diminished.
Just 28, Teixeira is the type of hitter the Yankees hope will revive an offense that dropped from a major league-leading 968 runs in 2007 to 789 last season. The switch-hitter batted a combined .308 with 33 homers and 121 RBIs for the Atlanta Braves and Los Angeles Angels, who acquired him July 29. He has reached 30 homers and 105 RBIs in five consecutive seasons.
Boston Red Sox executives met with Teixeira and agent Scott Boras last week and were told they were being outbid. Teixeira, who is from Maryland, also had discussed signing with the Baltimore Orioles.
"We would have loved to have had the player, who appealed to us because of the special circumstances of where he's from and where we are. We diverted from our plan to try to get him," said Orioles president of baseball operations Andy MacPhail. "But at the end of the day, it was just too much to pay for one player. It would handicap our ability to go forward."
The Washington Nationals also held talks. General manager Jim Bowden said his team's owners "demonstrated their commitment to win, when they stepped up in negotiations ... at the highest level."
"We are disappointed we weren't able to sign him," Bowden wrote in an e-mail to the AP, "and will now turn our attention to several other opportunities to improve our major league club this offseason."
The Angels made an eight-year offer during the winter meetings but withdrew it last weekend.
Teixeira will replace a void in the Yankees lineup created by the departures of first baseman Jason Giambi and right fielder Bobby Abreu, who became free agents. It also creates a logjam for New York, which acquired first baseman Nick Swisher last month in a trade with the Chicago White Sox.
Although Swisher also can play the outfield, the Yankees have a multitude of options there, including Johnny Damon, Hideki Matsui, Melky Cabrera, Brett Gardner and Xavier Nady. Matsui currently is likely to be the designated hitter much of the time.
For all Teixeira's positives, he gives the Yankees another slow-footed player who in 2010 will become the team's third starting infielder in his 30s. But the 2005 All-Star is a two-time Gold Glove winner who should improve New York's defense.
