Colon, 37, did not pitch in the big leagues last season, but he showed the Yankees enough while working in the Dominican Winter League that the team decided to offer him a deal.
The deal would pay Colon $900,000 if he makes the Major League roster out of Spring Training, according to the New York Post. The Yankees have not made an official announcement concerning the deal.
Colon, who won the 2005 AL Cy Young Award while pitching for the Angels, could provide depth for the Yankees. The rotation is their greatest area of need at the moment, projecting to begin the season with rookie Ivan Nova and journeyman Sergio Mitre at the back end.
Colon had said earlier this month that the Yankees, Indians and Rangers were among the teams interested in signing him.
Since Colon's standout 2005 campaign, when he went 21-8 with a 3.48 ERA in 33 starts, he has gone just 14-21 with a 5.18 ERA in 48 big league games with the Angels, Red Sox and White Sox. Over his career, Colon has a 153-103 record with a 4.10 ERA.
Bryan Hoch is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.