In 1997, the San Diego Padres purchased Irabu's contract from the Chiba Lotte Marines. The criticisms of this sale from other MLB teams, who wished to bid on Irabu, led to the creation of the posting system currently used by Japanese and MLB teams. Irabu, however, refused to sign with the Padres, saying he would only play with the Yankees. For the negotiating rights to Irabu, the Yankees offered the Padres a choice of one from a list of players including Brian Boehringer, David Weathers, Chris Cumberland, Andy Fox and Matt Luke. The Padres eventually included him as a player-to-be-named-later in a trade that involved Homer Bush and Irabu going to the New York Yankees in exchange for Rafael Medina, Rubén Rivera, and $3 million in cash. The Yankees signed Irabu to a $12.8 million, four-year contract, and after only eight minor league appearances, the Yankees put him in their rotation.
Irabu made his highly publicized debut on July 10, 1997, drawing almost twice as many fans that night as they averaged for weeknight games. He played with the Yankees from 1997 through 1999, winning two World Series rings (1998, 1999) despite only pitching in one postseason game and having no postseason decisions. George Steinbrenner publicly expressed disgust at his weight, at one point calling him a "fat pussy toad" after he failed to cover first base on a ground ball during a spring training game. Steinbrenner refused to let Irabu accompany the team to Los Angeles, but two days later, Steinbrenner apologized and allowed Irabu to join the team.