Posada, 36, had one of his best years at the plate in 2007, hitting .338 with 20 home runs and 90 runs batted in.

The contract makes the switch-hitter, who has spent his entire career with the Yankees, the highest paid catcher in Major League Baseball.

While the Yankees secured an important bat in the middle of their lineup, they were not able to complete a deal for ace closer Mariano Rivera.

Rivera is among the leading group of free agents available to be signed starting on Tuesday.

Other top free agent targets include Rivera's 2007 team mate Alex Rodriguez, World Series MVP Mike Lowell of the Boston Red Sox and center-fielders Torii Hunter of the Twins, Andruw Jones of the Braves and Aaron Rowand of the Phillies.

(Writing by Larry Fine, editing by Justin Palmer)