The person spoke on condition of anonymity Monday because the deal had not been announced.
RELATED: Read more about the deal on ESPN.com
Ibanez is a 39-year-old outfielder who played with Philadelphia the last three seasons. He is expected to be the Yankees' primary designated hitter against right-handed starting pitchers. New York decided on him over Johnny Damon and Hideki Matsui, who also are free agents.
The agreement came one day after the Yankees traded A.J. Burnett to Pittsburgh, a deal in which the Pirates pay $5 million of the pitcher's salary this year.
AP freelance writer Mark Didtler in Tampa, Fla., contributed to this report.