Johnson reached a preliminary agreement Friday on a one-year, $5.5 million contract, according to The Associated Press, citing a person familiar with the negotiations who spoke on the condition of anonymity because the agreement is not yet complete.
Johnson will need to pass a physical in New York on Monday before an official announcement could be made. The 31-year-old could earn about $1 million more in performance bonuses next year, and The AP reported that the deal includes a 2011 mutual option for at least $5.5 million with possible escalators.
Johnson, 31, made his big league debut with the Yankees in 2001 and played parts of three seasons in New York before being traded to the Expos as part of a package for right-hander Javier Vazquez.
Johnson split last season with the Nationals and Marlins, hitting a combined .291 with eight homers, 62 RBIs and 99 walks. It is Johnson's .402 career on-base percentage that appeals most for the Yankees, who see him as a logical replacement for Damon batting second.
Posting a .426 on-base percentage in 2009, Johnson ranked third among all Major Leaguers, with only Joe Mauer (.444) and Albert Pujols (.443) performing better. On the Yankees, Johnson would project as a designated hitter, since the club has Mark Teixeira and Nick Swisher capable of playing first base.
The Yankees had hoped on some level to bring back Damon, with general manager Brian Cashman even calling him "the perfect two-hole hitter for [Yankee Stadium]." But agent Scott Boras' apparent insistence on garnering a rich multiyear deal may have forced New York to look elsewhere.
At one time, Damon's camp was sitting around three years and $36 million with their demands, while New York sat around $18 million to $20 million for two seasons of the 36-year-old Damon's services. The Yankees have vowed to reduce payroll from the $201 million figure they opened 2009 with, a stance Cashman said is concrete.
"Nick's a great guy," Damon told the New York Daily News. "I'm sure he's happy rejoining a great organization."
Managing general partner Hal Steinbrenner downplayed the odds of Damon returning at a news conference on Thursday, saying, "We all love Johnny Damon, and he was a big part of the reason we won that championship. I think right now, there's just a difference of opinion to what the pay is, quite frankly."
While the Yankees have talked about the benefits of a "revolving door" DH situation where players like Alex Rodriguez, Derek Jeter, Jorge Posada and Mark Teixeira could take turns, manager Joe Girardi said that he is in favor of an "almost full-time DH."
Cashman said he did not necessarily need defensive flexibility out of a DH candidate, which is where a player like Johnson could come in.
"It's nice to be able to rotate guys and have that spot to rest them and give them blows," Cashman said. "At the same time, it doesn't mean that you don't be open-minded to a bat that fits in that part of the lineup."
Johnson has been a productive Major League hitter, but it has been an issue keeping him on the field, as he has served nine stints on the disabled list in his career.
After missing all of the 2000 season with a right hand injury, Johnson was sidelined in '03 with a stress fracture in his right hand, then in '04 with a fractured right cheekbone and a lumbar strain.
Johnson suffered a fractured right femur in 2006 and was out for the entire '07 season, then a right wrist injury in '08 limited him to 38 games. The Mariners and Giants were also believed to be interested in Johnson as a first baseman.
If the Johnson deal is completed, the Yankees will have said hello to Curtis Granderson and Johnson within the span of two weeks, while also likely saying goodbye to Damon and World Series Most Valuable Player Hideki Matsui, who finalized a one-year, $6.5 million deal with the Angels on Wednesday.
Melky Cabrera appears likely to take over Damon's spot in left field, with Granderson in center field and Nick Swisher in right field. Brett Gardner and Jamie Hoffmann, who was acquired after the Rule 5 Draft, could compete for a reserve role.
Steinbrenner had alluded Thursday to a potential move for a hitter, which could have prefaced the Johnson deal.
"I don't believe we're done yet, because I believe there are a couple of areas we're still looking at," Steinbrenner said. "We always worry about pitching. Every team does. Granderson is going to go a long way to replace the offense there, but I still think we're looking for a bat."
Bryan Hoch is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.