The decision by arbitrator Fredric Horowitz on Saturday cut the suspension issued Aug. 5 by baseball Commissioner Bud Selig from 211 games to this year's entire 162-game regular-season schedule plus any postseason games. The three-time American League Most Valuable Player will lose just over $22 million of his $25 million salary.
Rodriguez vowed to continue his fight in federal court to reverse the decision.
"It's virtually impossible. The arbitration will stand. I think it's almost inconceivable that a federal court would overturn it," said former baseball Commissioner Fay Vincent, a graduate of Yale Law School. "The arbitration is itself an appeal from the commissioner's judgment. How many appeals do you go?"
Rodriguez is the most high-profile player ensnared by baseball's drug rules, which were first agreed to in 2002 as management and union attempted to combat the use of steroids and other performance-enhancing drugs. In sustaining more than three-quarters of Selig's initial penalty, Horowitz's decision will be widely viewed as a victory for the 79-year-old Selig, who has ruled baseball since 1992 and says he intends to retire in January 2015.
A 14-time All-Star, Rodriguez has been baseball's highest-paid player under a $275 million, 10-year contract. He has spent parts of the last six seasons on the disabled list and will be 39 years old when he is eligible to return to the field in 2015. He is signed with the Yankees through the 2017 season.
Rodriguez admitted five years ago he used performance-enhancing drugs while with Texas from 2001-03 but has denied using them since. He already sued MLB and Selig in October, claiming they are engaged in a "witch hunt" against him.
"The number of games sadly comes as no surprise, as the deck has been stacked against me from day one," Rodriguez said in a statement. "This is one man's decision, that was not put before a fair and impartial jury, does not involve me having failed a single drug test, is at odds with the facts and is inconsistent with the terms of the Joint Drug Agreement and the Basic Agreement, and relies on testimony and documents that would never have been allowed in any court in the United States because they are false and wholly unreliable."
The Major League Baseball Players Association had filed a grievance last summer saying the discipline was without "just cause."
The 65-year-old Horowitz, a California-based lawyer who became the sport's independent arbitrator in 2012, heard the case over 12 sessions from Sept. 30 until Nov. 21. Technically, he chaired a three-man arbitration panel that included MLB Chief Operating Officer Rob Manfred and union General Counsel Dave Prouty. The written opinion was not made public.
In Rodriguez's only partial victory, Horowitz ruled he is entitled to 21-183rds, or about 11.5 percent, of his salary this year, a person familiar with the decision said, speaking on condition of anonymity because the decision was not made public. That comes to $2,868,852.46.
Baseball's drug agreement says the amount of lost pay shall match the number of regular-season games suspended, regardless of days over the season, which is 183 days this year.
Despite the ban, baseball's drug rules allow Rodriguez to participate in spring training and play in exhibition games, although the Yankees may try to tell him not to report.
New York figures to be happy with the decision, which eliminates uncertainty and gives the Yankees additional money to sign Japanese pitcher Masahiro Tanaka or other free agents while remaining under the $189 million luxury tax threshold.
MLB was largely pleased.
"While we believe the original 211-game suspension was appropriate, we respect the decision rendered by the panel and will focus on our continuing efforts on eliminating performance-enhancing substances from our game," MLB said in a statement.
The union said it "strongly disagrees" with the ruling but added "we recognize that a final and binding decision has been reached."
"We respect the collectively-bargained arbitration process which led to the decision," the union's statement added.
Biogenesis founder Anthony Bosch testified in the hearing after reaching an agreement with MLB to provide evidence.
"Tony Bosch doesn't take joy in seeing Alex Rodriguez suspended from baseball, but he believes the arbitrator's decision was appropriate," his spokeswoman, Joyce Fitzpatrick, said in a statement.
Bosch is to appear Sunday on "60 Minutes" along with MLB Chief Operating Officer Rob Manfred. In an interview with "CBS Evening News on Saturday," Scott Pelley of "60 Minutes" said Bosch told him he administered six banned substances to Rodriguez, including testosterone and human growth hormone.
Picked first in the 1993 amateur draft, Rodriguez reached the majors at age 18 with Seattle and was an All-Star by 20. He seemed destined to become one of the greatest players in the history of the game, and appeared in line to break the career home run record - he ranks fifth with 654.
"This injustice is MLB's first step toward abolishing guaranteed contracts in the 2016 bargaining round, instituting lifetime bans for single violations of drug policy, and further insulating its corrupt investigative program from any variety of defense by accused players, or any variety of objective review," Rodriguez said.
"I have been clear that I did not use performance-enhancing substances as alleged in the notice of discipline, or violate the Basic Agreement or the Joint Drug Agreement in any manner, and in order to prove it I will take this fight to federal court. I am confident that when a federal judge reviews the entirety of the record, the hearsay testimony of a criminal whose own records demonstrate that he dealt drugs to minors, and the lack of credible evidence put forth by MLB, that the judge will find that the panel blatantly disregarded the law and facts, and will overturn the suspension."
Rodriguez has claimed Selig was on a vendetta to smear him as a way of burnishing the commissioner's image following the Steroids Era. Both sides have admitted paying for evidence as they prepared for the hearing.
Fourteen players were penalized following the Biogenesis probe, and they all accepted penalties. Milwaukee outfielder Ryan Braun sat out the final 65 games of the season, the other players were given 50-game suspensions.
A-Rod's drug penalty was for "his use and possession of numerous forms of prohibited performance-enhancing substances, including testosterone and human growth hormone over the course of multiple years," MLB said last summer. His punishment under the labor contract was "for attempting to cover up his violations of the program by engaging in a course of conduct intended to obstruct and frustrate the office of the commissioner's investigation."
Rodriguez's penalty was more than double the previous high for a PED suspension, a 100-game ban given last year to San Francisco pitcher Guillermo Mota for a second offense. Kansas City infielder Miguel Tejada was given a 105-game ban last summer following a third positive test for amphetamines.