Lee, the most highly sought pitcher on this winter's free-agent market, turned down more lucrative offers from the New York Yankees and the Texas Rangers to return to the team he helped pitch into the World Series in 2009.
Lee reached a preliminary agreement on a $120 million, five-year contract, plus an option for a sixth year that vests if he reaches 200 innings pitched in 2015 or 400 innings pitched combined in '14 and '15. The deal is subject to the 32-year-old left-hander passing a physical.
•Three things we learned from Lee's deal
The Yankees had offered Lee six years at $22 million each, plus an option year for $16 million, for a total of $148 million over seven years. The Rangers' offer was for $120 million over six years, plus an option.
The 2008 AL Cy Young Award winner apparently could not bypass the chance to join the Phillies' already stellar pitching staff of Roy Halladay, Roy Oswalt and Cole Hamels. With Lee, it becomes the most formidable rotation in either league.
The Phillies are now in serious talks with the Red Sox about trading pitcher Joe Blanton to clear payroll space for the Lee deal.
The Phillies weren't even known to be in the hunt for Lee until earlier Monday, when they were revealed to be the "mystery team" that was pursuing him along with the Yankees and Rangers.
But just hours later the Yankees and Rangers both received telephone calls telling them they were out of the running.
Lee is said to have absolutely loved his brief time with the Phillies in 2009, when he won two World Series games against the Yankees. People close to Lee say he envisions himself as No. 2 in a rotation with Halladay at the top, Oswalt pitching third and Hamels fourth. Now they may well have the best No. 1 pitcher in baseball, the best No. 2, the best No. 3 and the best No. 4.
Philadelphia offered him a three-year deal for about $54 million after the 2009 season. When he turned it down, the Phillies dealt him to the Seattle Mariners on Dec. 16 as part of a four-team, nine-player swap while simultaneously acquiring Halladay from the Toronto Blue Jays and signing him to a new contract that added $60 million over three seasons.
Lee is 102-62 with a 3.85 earned run average over nine seasons with the Cleveland Indians, Phillies, Mariners and Rangers.
A fourth-round draft pick in 2000, Lee is has excelled in the postseason, going 7-2 with a 2.13 ERA for Philadelphia and Texas in the past two years, including 3-0 with a 1.88 ERA against the Yankees.
Lee won 18 games for Cleveland in 2005, then got hurt in spring training in 2007 and was demoted to the minors. He returned to the big leagues, finished 5-8 with a 6.29 ERA and was left off Cleveland's postseason roster. He rebounded to go 22-3 with a 2.54 ERA in 2008 and was voted the AL Cy Young Award.
He was 14-13 for the Indians and Phillies in 2009, and 12-9 for the Seattle Mariners and Rangers this year.
With Lee's departure, the Rangers could move closer Neftali Feliz from the bullpen to the rotation and may attempt to acquire 2009 AL Cy Young Award winner Zack Greinke in a trade from the Kansas City Royals.