Paul Byrd pitched into the sixth inning for the win.
Victor Martinez had a two-run single for the Indians, who scored four runs over the first two innings and built a 6-1 lead while advancing to the AL Championship Series. The Indians will play Boston, starting Friday night.
The Indians won their first playoff series since 1998 when they beat the Red Sox in the ALDS before losing to the Yankees. They are seeking their first World Series title since 1948 when they beat the Boston Braves.
The loss could mean Joe Torre will be out after 12 years as Yankees manager, despite leading the team to the playoffs in each of his seasons and winning the World Series four times. Owner Georgia Steinbrenner was quoted Sunday as saying he didn't "think we'd take him back if we don't win this series."