The deal was not officially announced as of Saturday night, however, as the Mariners have to make a 40-man roster move to create a spot for Ibanez.
The Associated Press is reporting the deal is for $2.75 million, with another possible $1.25 million in performance bonuses. Ibanez played for $1.1 million last year for the Yankees, who expressed interest in having him return earlier this week.
Ibanez, 40, played for Seattle from 1996-2000 and again from 2004-08. He spent last year with the Yankees, providing several clutch postseason home runs after batting .240 with 19 home runs and 62 RBIs in the regular season.
The Mariners have been talking all offseason about adding more of a veteran presence to their young club and Ibanez certainly qualifies. The 17-year Major Leaguer started 65 games for the Yankees in left field last season, 23 at designated hitter and 11 in right field.
Seattle traded for Angels first baseman/designated hitter Kendrys Morales earlier this week and previously signed outfielder Jason Bay to a one-year deal and acquired infielder Robert Andino from the Orioles.
Ibanez figures to provide some depth and a left-handed bat to the corner outfield or designated hitter spots and gives some insurance if center fielder Franklin Gutierrez has continued health problems. In that scenario, Michael Saunders would likely move back to center and leave an opening in left field.
The Mariners also have Casper Wells, Eric Thames, Carlos Peguero and Bay in their current outfield mix.
Ibanez ranks among all-time Mariners leaders in nearly every offensive category, including home runs (seventh with 127), RBIs (seventh with 547), hits (eighth with 967), games played (eighth with 986) and slugging percentage (ninth at .464).
Since last playing for Seattle, Ibanez has averaged 30 doubles, 22 home runs, 80 RBIs and 141 games a season in three seasons with the Phillies and one with the Yankees. He was a National League All-Star with the Phillies in 2009.
In eight playoff games last year, he hit .318 (7-for-22) with three home runs, including a pair of homers in Game 3 of the American League Division Series against the Orioles when he tied the game with a pinch-hit solo blast in the bottom of the ninth and then ended it with a walk-off home run in the 12th.
The 17-year veteran has hit .278 with 271 home runs and 1,116 RBIs in 1,947 games, including a .284 average in 10 seasons with the Mariners, who originally drafted him in the 36th round in 1992.
Ibanez has hit .284 with 66 home runs and 262 RBIs in 467 career games at Safeco Field.