Masterson (10-11) won for the third time in four starts, yielding seven hits while walking a pair and striking out six.
Vinny Pestano tossed 1 1/3 scoreless frames and Chris Perez set the Yankees down 1-2-3 in the ninth for his 33rd save as the Indians notched their first victory since a 5-2 decision over Boston two weeks ago.
Michael Brantley socked a three-run homer in the first inning to provide the Tribe's offense.
The Yankees' Hiroki Kuroda (12-9) was saddled with a complete-game loss, surrendering three runs on four hits through eight innings. He walked two and struck out six.
Mark Teixeira drove in the only run for American League East-leading New York.
Notable deaths of 2014 [PHOTOS]
LeBron James reveals his new Nike shoes