Padilla, 28, finished 9-12 with a 4.71 earned run average in 27 starts last year. He was bothered by elbow tendinitis early, but came on strong in the second half of the season. After the All-Star break, Padilla went 5-4 with a 3.63 ERA and opponents hit just .217 against him.
"He's extremely talented and has a strong track record," Rangers general manager Jon Daniels said. "He's a ground ball pitcher with power stuff. We got a clean bill of health on him and we think he's poised to have a good year in what will be a free agent year."
Padilla, who made $3.2 million last year, has one more season of arbitration eligibility. He will be reunited with Rangers manager Buck Showalter and pitching coach Mark Connor, who worked with Padilla while with the Arizona Diamondbacks.
Padilla was 49-45 in 5 1/2 seasons with the Phillies. His best season came in 2002 when Padilla went 14-11 with a 3.28 ERA and made the NL All-Star team. He could factor in as a No. 2 or No. 3-type starter for the Rangers.
"He certainly has that ability and he pitched at that level in '02 and '03," Daniels said. "I think we have a significant benefit in his familiarity with Mark Connor. There's a comfort level with Mark and Buck that should help him achieve his potential."
With Padilla aboard, the Rangers are still looking for one more starter to work at the top end of the rotation. They could get involved in free agent talks with agent Scott Boras regarding Jarrod Washburn, Jeff Weaver or Kevin Millwood. Meanwhile, Texas continues to explore the trade market for starting pitching while dangling a surplus of outfielders with Major League experience.
But the Rangers won't force the issue with big-name starting pitching if the right deal isn't there. The alternative is to shoot for a club similar to the 2004 Rangers, who contended with serviceable starting pitchers and a strong bullpen.
Daniels said the Rangers won't lock themselves into bad contracts "just for the sake of pounding our chest and saying we signed a [starting] pitcher. I think that's counter productive and puts us in a worse spot than we would otherwise be.
"We'd like to continue to address the rotation and add another guy who can eat some innings and give us some quality starts while still improving the bullpen."
Free agent relievers such as Braden Looper and Octavio Dotel have also drawn the Rangers' interest.
Meanwhile, the Rangers whittled their list of possible arbitration cases on Monday by reaching one-year agreements with utility infielder Mark DeRosa and left-handed reliever Brian Shouse. Major League clubs have until Dec. 20 to decide whether to tender contracts for the 2006 season.
Robert Falkoff is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.