Beltran, 36, hit .296 with 24 home runs and 84 RBIs in 145 games this past season for the NL champion St. Louis Cardinals.
The deal with Beltran, which comes on the same day former Yankees second baseman Robinson Cano agreed to a 10-year, $240 million deal with the Seattle Mariners, marks the latest addition to a revamped lineup in the Bronx.
Beltran has continued his late-career surge during the past two seasons, making back-to-back All-Star teams the last two years to strengthen his case for the Hall of Fame.
The Kansas City Royals, Beltran's first major league team, were among his most aggressive suitors in free agency.
The Yankees had sent out signals that they wouldn't be willing to go to three years on a deal for Beltran, but they relented to get an agreement done in advance of the winter meetings, which begin Monday in Orlando, Fla.
Beltran's wife, Jessica, acknowledged his return to New York late Friday night, tweeting, "Back to NY!"
With Beltran, Cano, Curtis Granderson ( New York Mets) and Mike Napoli (Boston) all reportedly reaching deals Friday, Shin-Soo Choo is easily the top hitter left on the free-agent market. Nelson Cruz and Kendrys Morales are behind Choo as potential targets for teams in search of an offensive upgrade.