Kuroda was a stalwart in the American League East champions' starting rotation in 2012, compiling 16-11 record with a 3.32 ERA and 167 strikeouts over 219 2/3 innings.
The deal is worth $15 million, the New York Daily News reported.
"I am very happy and excited to re-sign with the Yankees. I am very grateful for all of the interest and all of the offers that I received from the various teams that courted me," the Japanese right-hander said in a statement.
Kuroda, 37, sports a 57-57 record and a 3.42 ERA during his five-year North American career.