The Florida Marlins will send Leiter to the Yankees for a player to be named.
Leiter, 39, was designated for assignment by the Marlins on Thursday. The team had 10 days to release or trade the left-hander, who was 3-7, 6.64 ERA this year as a starter and reliever.
Leiter signed a one-year, $8 million contract with the Marlins. The Yankees are believed to be picking up part of his salary, but the Marlins will be responsible for the bulk of his contract.
The Yankees are desperate for starting pitching. Injuries to Chien-Ming Wang, Carl Pavano, Kevin Brown and Jaret Wright have decimated the rotation, and recent obtainees Tim Redding and Darrell May have been ineffective.
When asked before Friday's game in Boston about the possibility of obtaining Leiter, Yankees manager Joe Torre alluded to Leiter having pitched for both the Yankees and Mets previously, saying, "He certainly is an experienced guy. One thing about our ballclub, when you look at the pitching, the New York experience factor usually carries a little weight."
Leiter was expected to provide leadership to a relatively young Marlins rotation while offering big-game experience.
"I truly expected more success in my return to the Florida Marlins," Leiter said in a statement released by the Marlins late Thursday. "To say I'm disappointed with my performance is vastly understated. I understand the organization needed to do what they had to do. It's a very good team with expectations to win. It's just unfortunate it didn't work out for me."
"He's a real pro and a good guy," manager Jack McKeon said. "He feels probably as bad as anybody. He's an all-around class guy, and I think we all hate to see him go."
While Leiter provided insights to a talented staff that includes Dontrelle Willis, Josh Beckett and A.J. Burnett, the veteran left-hander never got into a pitching groove. From the beginning of Spring Training, through 17 games with the Marlins (including 16 starts), Leiter lacked consistency.
After suffering a loss to the Cubs on Sunday at Dolphins Stadium, Leiter's record fell to 3-7 while his ERA rose to 6.64. Falling behind batters was a constant problem, as evident by the fact Leiter walked 60 batters in 80 innings, while giving up 88 hits.
Cutting ties with a savvy veteran was a difficult task for the Marlins, who were anticipating big things from a consistent winner. Leiter had a string of winning at least 10 games in 10 straight seasons, including a 10-8 record and 3.21 ERA for the Mets last year.
Sunday's setback started the process of the front office examining what to do with Leiter. On Wednesday, general manager Larry Beinfest notified Leiter that he wanted to meet with the veteran left-hander. Leiter was with his family. Last Friday, Lori Leiter gave birth to the couple's fourth child, a girl.
While informed of the team's decision on the phone, Leiter met later in the day Wednesday with Beinfest at a restaurant near his Weston home.
"We spent a good amount of time together, talking about everything," Beinfest said. "We talked about the disappointment and how things went. Everybody wished it would have went better."
A respected veteran with a lifetime 158-127 record, Leiter played a crucial role in the Marlins winning the World Series in 1997. On May 11, 1996, he tossed the first no-hitter in Marlins history, blanking the Rockies, 11-0.
But this season, his bread-and-butter pitch, his cut fastball, wasn't finding the mark. While Leiter continued to say he felt fine physically, scouts noted that his pitches would flatten out, and he wasn't as deceptive as he had been.
Joe Frisaro is a reporter for MLB.com. Reporter Mark Feinsand contributed to this article. This story was not subject to the approval of Major League Baseball or its clubs.