The 40-year-old five-time All-Star catcher will end his 17-year big league career with the team that drafted him rather than pursue another team. Posada became a free agent after a trying season in New York, the final year of a four-year, $52 million contract.
The Yankees announced Posada's decision in a statement Monday.
The clubhouse leader helped the Yankees win five World Series titles. For his career, Posada hit .273 with 275 home runs and 1,065 RBIs. But he lost his catching job this year and his playing time diminished.