The announcement was made via the Yankees' Twitter account. The derby will be held at Marlins Park next Monday and features defending champion Giancarlo Stanton of Miami.
Judge, 25, leads the majors in home runs (27) during his rookie season and his batting average (.327) and RBIs (62) are tops in the American League. The 6-foot-7 sensation was the AL's top vote-getter in fan balloting for the All-Star Game and will start in right field.
"Never really dreamed that it would actually happen. It was pretty surreal," Judge said of participating in the derby after initially being invited in June.
Sanchez, who has belted 13 homers in 2017, is one season removed from going deep 11 times during a 15-game stretch in August.