The 29-year-old right-hander will receive $800,000 this year rather than his request for $975,000. Arbitrators John Sands, Dennis Archer and Marlene Gold made the decision Saturday, a day after hearing arguments.
Cleveland defeated pitcher Vinnie Pestano last weekend in the Indians' first arbitration hearing since 1991. Indians right-hander Justin Masterson is one of six players left in arbitration from among the 146 who filed last month. Hearings are scheduled through Feb. 20.
Tomlin had elbow ligament-replacement surgery in August 2012 and returned to make one big league appearance last season, pitching two scoreless innings at the Chicago White Sox on Sept. 12. He made $501,800 last year.
Teams have a 293-215 advantage in decisions since arbitration began in 1974.
Others slated for hearings next week include Atlanta closer Craig Kimbrel, Boston left-hander Andrew Miller, Cincinnati right-hander Homer Bailey, Oakland outfielder Josh Reddick and San Francisco first baseman Brandon Belt.
Seattle first baseman Justin Smoak agreed Saturday to a one-year contract that guarantees him $2,787,500.