Lowe, 39, was 8-10 with a 5.52 earned run average in 21 starts this season with Cleveland before the Indians released him Friday.
Lowe has appeared with five teams over a 16-year major league career. Half of those seasons were with the Boston Red Sox. He has a career 174-156 record with a 4.01 ERA. Lowe also had 85 saves, including a league-leading 42 for the Red Sox in 2000.
He was selected to the American League All-Star Team in 2000 and 2002.
To make room for Lowe on the roster, the Yankees optioned pitched Ryota Igarashi to Triple-A Scranton/Wilkes Barre. Igarashi was claimed off waivers by New York on May 29. He appeared in two games for a total of three innings for the Yankees.