The deal was announced Sunday, a day after Young agreed to waive his no-trade clause.
"Given the makeup of our roster, and some of our internal options, I think this was the right way to go," Rangers general manager Jon Daniels said Sunday morning in a teleconference with reporters.
The Phillies are sending right-hander Josh Lindblom and minor league righty Lisalverto Bonilla to the Rangers to get Young, who fills a void at third base. A source told ESPNDallas.com's Richard Durrett on Thursday that the Rangers were going to have to pay at least half of Young's $16 million 2013 salary to complete the deal. Young will receive $1.2 million in "benefits" in exchange for waiving his no-trade clause, a source confirmed to ESPN.
"This is a very, very tough situation, with Michael being with the Rangers for 12 years," Rangers manager Ron Washington said. "It's something that we sorely will miss. We tried to do whatever we could to make it a good situation for Michael. If there was crying in baseball, I'd certainly cry. ... I wish him well."
Young batted .277 with eight homers and 67 RBIs in 2012, a down year for him. In the nine previous seasons, Young hit at least .300 seven times and averaged 17 homers and 90 RBIs.
"Clearly, this brings a wonderful package to what we're trying to do here in Philadelphia," Phillies general manager Ruben Amaro Jr. said. "One, he's a very, very good ballplayer. He has a tremendous track record. I know that last year was not his best year but after talking to the scouts and discussing it intently with the rest of our front office, we felt like this is an excellent person to bring to our club."
A former AL Gold Glove winner at shortstop, Young hasn't play third base regularly since 2010. Seven Phillies started at third base last year, including often-injured former All-Star Placido Polanco.
"He has all the elements we're looking for," Amaro Jr. said of Young. "First of all, the makeup is extraordinary. He's the ultimate team player. He knows how to play baseball. He's a winning baseball player. He's had the opportunity to be in big games in the playoffs and he just fits real well.
"The fact that he hits right-handed helps balance our lineup out a little bit as well. I just think all the elements he brings to the table for us are very, very positive."
Young was originally selected by the Toronto Blue Jays in the fifth round of the 1997 amateur draft. He was traded to the Rangers on July 19, 2000 for pitcher Esteban Loaiza. Young has a .301 average with 177 home runs and 984 RBIs in 1,823 major league games -- all with Texas. He is the club leader in games, at-bats (7,399), runs (1,085), hits (2,230), doubles (415), triples (55) and total bases (3,286). Young has a .248 average with 3, homers, 10 doubles and 19 RBIs in 34 postseason games.
Young began his career at second base with the Rangers. He moved to shortstop to accommodate Alfonso Soriano, who was acquired in the trade that sent Alex Rodriguez to the New York Yankees. Young won his only Gold Glove at shortstop in 2008 and then moved to third base to make room for Elvis Andrus in 2009. He played two seasons at third before moving to designated hitter and a utility role after Adrian Beltre arrived in Texas.
The emergence of rookie infielder Jurickson Profar meant even less opportunity for Young to play to in the field this season. Profar, who turns 20 in February, is the Rangers' top prospect. He played second base and shortstop in nine games down the stretch last season and had a hit in his only at-bat in an AL wild-card loss to Baltimore.
"Michael brings a lot to our team, not just on the field, but off it as well," Amaro Jr. said. "He has been one of the premier hitters in the American League for a decade and is someone who has a tremendous presence in the clubhouse. We couldn't be happier that he has accepted the assignment to come to the Phillies."
Information from The Associated Press was used in this report.