Damon hurt his shoulder when he crashed into the Yankee Stadium fence attempting to catch a ball on July 4, and he went on the disabled list for the first time in his 14-season major league career.
He was activated last week and served as the designated hitter in seven games before returning to left against the Orioles. He went 2-for-5 in New York's 7-6 loss, and didn't appear to have any problems in the field.
"I told them I was ready to go out there," Damon said before the game. "I've been making throws, letting some loose and throwing it as hard as I can, and you're going to feel some pain there but I felt like it was time to get back out there."
Damon hit a three-run drive in Monday night's 13-4 loss to the Orioles for his first homer since May 27 at Baltimore, snapping a streak of 156 at-bats without one. It was his longest single-season drought since he went 188 at-bats without a homer in 1996 with Kansas City.
Damon, batting .318 with seven homers and 43 RBIs in 90 games this season, said his shoulder probably won't be 100 percent until the offseason.
"There's going to be pain there so it's just a matter of how much I can take," he said.
That was news to manager Joe Girardi, who thought Damon was pain free.
"He told us Sunday night that he had no pain," Girardi said.
Damon's improved health and Saturday's acquisition of Xavier Nady from the Pittsburgh Pirates gives Girardi more flexibility for his lineup. Alex Rodriguez was the designated hitter against Baltimore -- "a semi off day," Girardi said -- and Wilson Betemit got the start at third. Nady was out of the lineup, and struck out as a pinch hitter in the eighth.
"We're in this stretch of 20 games [in 20 days]," he said, "and you want your horses to play every day, and this is one way of keeping them off the field a little bit."
Damon playing left field wasn't the only encouraging sign for the Yankees on Tuesday. Right-hander Chien-Ming Wang got the cast off his right foot. He is expected to be on crutches with a boot protecting his leg for another week before being re-evaluated.
Wang, who was injured running the bases in Houston on June 15, said he felt better, but the ace isn't expected back before September.
"I don't think you count on anything," Girardi said. "Obviously, we hope we're going to get him back because he's a big part of our club. You just got to see how the rehab goes."