The 35-year-old left-hander was one of three Major League players to accept salary arbitration on Friday, joining the Padres' Michael Barrett and the Astros' Mark Loretta.
Pettitte had contemplated retirement for a period after the Yankees' playoff elimination, but sent word to the club on Sunday through his agent, Randy Hendricks, that he had decided to return for the 2008 season.
Pettitte had held a $16 million player option for next year but declined it, saying he needed more time to contemplate his future. The Yankees allowed Pettitte that luxury, leaving the same financial terms on the table in the event he did return, while also recruiting him with a series of telephone calls from manager Joe Girardi and a variety of teammates.
Pettitte was 15-9 with a 4.05 ERA in 34 starts for New York this season, serving as a main veteran presence on a roster that was forced to rely on the contributions of rookies early. Having put off similar thoughts of retirement, Pettitte ranked ninth in the American League with 215 1/3 innings pitched and turned in the team's most dominant performance in October, pitching 6 1/3 strong innings against the Cleveland Indians in Game 2 of the AL Division Series.
Pettitte was one of four players offered salary arbitration by the Yankees, though two of them were procedural moves -- both closer Mariano Rivera and third baseman Alex Rodriguez have agreed to new contracts, but because those deals are not final, the Yankees offered arbitration as a formality.
Reliever Luis Vizcaino also declined salary arbitration from the Yankees and appears to be heading toward his sixth Major League uniform, ending his stay in New York after one year.
Vizcaino, 33, made a career-high 77 appearances for the Yankees after being obtained from the D-backs in January's Randy Johnson trade, finishing with a 4.30 ERA and tying the Major League lead with eight victories as a reliever against two losses.
The Yankees had spoken optimistically about hoping to retain Vizcaino despite a swelled financial market for free agent relievers, but Vizcaino's agent, Bean Stringfellow, said Wednesday that would not be likely.
Stringfellow told the New York Post that negotiations with the Yankees were not progressing as his client would have hoped and was quoted by the newspaper as saying, "We are proceeding like the Yankees aren't involved." Yankees general manager Brian Cashman has identified upgrading the bullpen as one of his top priorities as the club absorbs options that may develop stemming from this week's Winter Meetings in Nashville, Tenn.
In order to make room for Pettitte on the Yankees' 40-man roster, the club designated outfielder Bronson Sardinha for assignment. The 24-year-old made his Major League debut with New York in September, batting .333 (3-for-9) with six runs scored and two RBIs in 10 games. He batted .250 with 15 home runs and 74 RBIs in 124 games with Double-A Trenton and Triple-A Scranton/Wilkes-Barre.
Bryan Hoch is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.