The 26-year-old appeared in 26 games for the Indians as a September callup last year, batting .269 (25-for-93) with three home runs and 11 RBIs.
A right-handed hitter, Canzler could give Yankees manager Joe Girardi some flexibility as a backup first baseman who can also play left field and serve as a designated hitter.
Last season, he made 24 starts -- 11 in the outfield, seven at first base and six as a DH -- and hit safely in 15 of those games.
In order to make room on the 40-man roster, the Yankees designated outfielder Chris Dickerson for assignment.
As a left-handed hitter, the 30-year-old Dickerson did not figure into the Yankees' plans with their already lefty-heavy outfield of Brett Gardner, Curtis Granderson and Ichiro Suzuki.
Canzler began the season with Triple-A Columbus, where he hit .265 with 36 doubles, 22 home runs and 79 RBIs in 130 games. He led the International League in doubles while also leading Columbus in homers and RBIs.
A 30th-round pick of the Cubs in the 2004 First-Year Player Draft, Canzler also appeared in three big league games with the Rays in 2011.
It has been a busy winter for Canzler, who was claimed on waivers by the Blue Jays from the Indians last month, only to be reclaimed by Cleveland on Wednesday. The Indians again designated Canzler for assignment after signing pitcher Brett Myers.