Lowe, who has agreed to pitch out of the bullpen, went 8-10 with a 5.52 ERA over 21 starts with the Indians. He was designated for assignment on Aug. 1 and became a free agent on Friday after clearing waivers.
The right-hander started the season 6-1 with an American League-leading 2.05 ERA through eight outings, but in his final 13 starts, Lowe went 2-9 with an 8.28 ERA, allowing 65 runs (61 earned) on 97 hits with 28 strikeouts and 28 walks over 66 1/3 innings.
With ace CC Sabathia landing on the 15-day disabled list, the Yankees have added some pitching depth with Lowe, who will be joining his sixth Major League team over 16 big league seasons.
The 39-year-old Lowe last pitched out of the bullpen as a member of the Red Sox in 2001. He has made 278 career relief appearances, going 18-22 with a 2.95 ERA, holding opponents to a .248 batting average.
He will bring a 174-156 career record and a 4.01 ERA with him to the Bronx.
To make room on the roster for Lowe, right-handed reliever Ryota Igarashi was optioned to Triple-A Scranton/Wilkes-Barre.
Chris Toman is an associate reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.