The deal is reportedly for $15 million. According to ESPN, there are also incentives that are worth less than $1 million.
Kuroda is coming off a strong season. The front-end starter had 16-11 record to go along with a 3.32 earned run average in his first season in New York, following a solid four-year campaign with the Los Angeles Dodgers. He has a career 3.42 ERA.
The question for the Yankees is whether Kuroda will be able to continue to pitch at a high level. The right-hander turns 38 in February, and pitchers who have played a majority of their career in Japan often throw more pitches than pitchers in Major League Baseball.
Kuroda finished fourth in the American League in innings pitched.
The free-agent choices for New York are limited this offseason. Zach Greinke is considered the prize starter in a thin market. Greinke would expect a long-term deal, and it appears unlikely that Greinke will end up in the Bronx given the Yankees' payroll concerns.
The Yankees are expected to have a similar rotation to 2012, but changes are expected in the lineup. New York are expected to make a decision soon outfielders Nick Swisher, Ichiro Suzuki, and catcher Russell Martin.
With Kuroda returning, general manager Brian Cashman can now focus on the lineup without having to focus much energy on a No. 2 starter.
"I am very happy and excited to re-sign with the Yankees," said Kuroda in a statement.
"I am very grateful for all of the interest and all of the offers that I received from the various teams that courted me.
"It was a tough decision for me to make, but at the end of the day, I wanted to try to win a championship with the team mates that I went to battle with last season."