Villone, a left-handed reliever, was 0-0 with a 4.25 ERA in 37 appearances for the Yankees in 2007, his second season with the club after being acquired from the Marlins in December 2005.
After not making the roster in Spring Training, losing a race for a bullpen spot to left-hander Sean Henn, Villone accepted an assignment to Triple-A Scranton/Wilkes-Barre, and had his contract purchased by the Yankees on May 15.
A product of Bergenfield, N.J., who resides in the New York metropolitan area, Villone was left off the Yankees' American League Division Series roster, but was added before Game 4 as an injury replacement for Roger Clemens.
The remaining Yankees eligible to file for free agency include outfielder Bobby Abreu, Clemens and left-hander Andy Pettitte. The Yankees hold a $16 million club option on Abreu.
The Yankees hold exclusive negotiating rights on their players until Nov. 12, when free agency begins in earnest.
On Monday, the first day that players were eligible to file for free agency, five Yankees did so -- catcher Jorge Posada, closer Mariano Rivera, third baseman Alex Rodriguez, first baseman Doug Mientkiewicz and reliever Luis Vizcaino.
The Yankees have spoken about hoping to re-sign both Posada and Rivera; Rivera met with club officials on Wednesday at Legends Field in Tampa, Fla., with his agent, Fernando Cuza.
General manager Brian Cashman said on Wednesday that he could not characterize the chances of the Yankees re-signing both Posada and Rivera.
"It's a fluid conversation, so handicapping that wouldn't be fair to the Yankees ownership and it wouldn't be fair to players on the other end," Cashman said.
"I can represent, without question, that we would like to re-sign them and they will have the opportunity to stay if they want to. We're going to try to make their decisions hard on them, but at the same time, they have decisions to make."
Backup catcher Jose Molina became New York's sixth player to file for free agency on Tuesday. The 32-year-old Molina batted .318 with one home run and nine RBIs in 29 games for New York after being acquired from the Angels on July 21 for Minor League pitcher Jeff Kennard. Molina has expressed a desire to stay in New York.
Bryan Hoch is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.