Lee is generally perceived as the Yankees' top priority among the 166 free agents, and general manager Brian Cashman has prioritized adding pitching among the other items on the club's to-do list, next to re-signing captain Derek Jeter and closer Mariano Rivera. The Bombers are also interested in retaining veteran Andy Pettitte if he does not retire.
The 32-year-old Lee was 12-9 with a 3.18 ERA in a season he split between the Mariners and the American League champion Rangers.
Until two losses to the Giants in the World Series, Lee had a 7-0 postseason record that included three victories over the Yankees, two in the 2009 World Series for the Phillies' only wins and one in last month's AL Championship Series.
New York's starting pitching stumbled down the stretch and was an issue in the six-game ALCS loss to the Rangers. CC Sabathia and Pettitte were both fighting injuries, Phil Hughes hit bumps at the end of his longest season to date and A.J. Burnett was wildly inconsistent.
Knowing they could use more help in the pitching department, the Yankees made a play for Lee in early July, when the left-hander was being dangled in trade talks by the Mariners, only to see him go to the Rangers in a last-minute surprise.
At that time, Sabathia was text messaging Lee repeatedly, excited about the possibility that they might be pitching in the same rotation again. The left-handers struck up a friendship during their time together with the Indians.
It is likely that the Yankees would use Sabathia as a chip to help sell Lee on New York, with Sabathia already saying he has no intention of exercising the opt-out clause that was written into his contract for after next year.
When news reports had Lee heading to the Yankees, their respective wives were already discussing where the Lees might settle in the New York area for the remainder of the season.
A potential deal for Lee could be hammered out along the lines of Sabathia's seven-year, $161 million contract signed in December 2008, the highest to date for a pitcher. Lee's camp has been reported to be seeking a six-year pact, and the dollar value per season could equal or eclipse Sabathia's $23 million figure.
While the Yankees are prepared to write Lee a big check, their offer will be no slam dunk. Lee has also said he enjoyed pitching in Texas during his months there heading to the postseason, and Rangers CEO Chuck Greenberg has said that the team has the deep pockets and motivation to retain Lee beyond the World Series run.
Other clubs believed to be interested in obtaining Lee's services include the Phillies, Brewers, Cubs, Nationals and Angels.