The 32-year-old left-hander and the Mariners agreed Saturday to an $8.5 million, one-year contract, a person with knowledge of the negotiations told The Associated Press.
The person spoke on condition of anonymity because the agreement was subject to a successful physical.
The native of Ladner, B.C. can earn an additional $1.5 million in performance bonuses for starts: $150,000 each for six to 10 and $750,000 more over starts 11-22.
He earned $4,629,630 in prorated pay from a $12.5 million salary last year with New York.
Paxton was 41-26 with a 3.42 ERA for the Mariners from 2013-18, striking out 617 and walking 168 in 582 1/3 innings. He was traded to the Yankees in November 2018 for a top prospect, left-hander Justus Sheffield, along with outfielder Dom Thompson-Williams and right-handed pitcher Erik Swanson.
Paxton struggled in the first half of his first season in New York, rediscovered his breaking ball in the second half and went 15-6 with a 3.82 ERA. He won a career-best 10 straight starts before leaving his final regular-season start after one inning that Sept. 27. The Yankees said he had a tight left glute muscle, and he returned to go 1-0 with a 3.46 ERA in three post-season starts, allowing five runs in 13 innings.
But he needed surgery in February 2020, when Dr. Andrew Dossett in Dallas performed a microscopic lumbar discectomy to repair a herniated disk and remove a peridiscal cyst.
Paxton was able to start the season on time when the pandemic caused a delay until late July, but he went just 2-3 with a 6.64 ERA in five starts. He did not pitch after Aug. 20 after sustaining what the Yankees said was a low-grade strain in his left forearm flexor.
He became a free agent, and the Yankees let Paxon, Masahiro Tanana and J.A. Happ leave as free agents, replacing then with Corey Kluber and Jameson Tallion.
Paxton figures to join a rotation initially projected to include Marco Gonzales, Yusei Kikuchi, Sheffield and Justin Dunn. Coming off a third-place finish in the AL West at 27-33, Seattle previously added free agent right-handed Chris Flexen, agreeing to a $4.75 million, two-year contract.