Tanaka's agreement with the Yankees was earlier reported by Fox Sports.
Tanaka, 25, went 24-0 with a 1.27 ERA in the Japanese League last season and is considered by many to be a top-of-the-rotation starter.
Under new rules set this offseason, the Yankees also owe a $20 million posting fee to the Rakuten Golden Eagles, Tanaka's team in Japan. The right-hander was still under contract with the Eagles for two more years.
Tanaka will join a revamped roster with the Yankees, who also have signed outfielder
Jacoby Ellsbury, catcher
Brian McCann and slugger
Carlos Beltran to lucrative contracts this offseason.
New York, which missed the postseason for just the second time since 1995 this past year, added some much-needed talent to its rotation, which previously had been led by aging veterans
CC Sabathia and
Hiroki Kuroda.
Tanaka and agent Casey Close had until a deadline of 5 p.m. ET on Friday to have a contract and physical completed with the ace pitcher's new team.
Tanaka is 99-35 with a 2.30 ERA and 1,238 strikeouts in 175 games for Rakuten since 2007. He has 53 complete games, including 18 shutouts.