The 31-year-old Sabathia had earlier made the announcement on his Twitter account before the team confirmed that the big left-hander would in fact be returning.
“Yankee fans, I’ll be here fighting for No. 28 next year,” the 31-year-old tweeted, referring to New York’s bid for a 28th World Series title.
“I’ll be coming back in 2012. I want to thank (team owners) the Steinbrenner family for making that happen.”
Sabathia, who had until midnight on Monday to opt out of his current deal, has agreed to a $25 million, one-year contract extension that includes a $5 million buyout.
Sabathia signed a seven-year, $161 million deal with the Yankees before the 2009 season, the largest contract at the time for a pitcher in Major League Baseball.
A five-time All-Star who won the Cy Young Award in 2007, Sabathia has recorded 176 wins and a 3.51 earned run average in 11 seasons with the Cleveland Indians, Milwaukee Brewers and Yankees.
