Ibanez agreed to a $2.75 million contract on Saturday, but the Mariners couldn't complete the deal until setting their 40-man roster after the Christmas holiday.
Mitchell, 25, was one of two pitchers acquired from the Yankees in the Ichiro Suzuki trade last July. He went 3-2 with a 2.96 ERA in eight starts for Triple-A Tacoma after his acquisition, with 33 strikeouts and 19 walks in 48 2/3 innings.
The Mariners will have 10 days to trade, release or designate Mitchell for a Minor League assignment.
Ibanez, 40, will be rejoining the Mariners for a third time in his career after two five-year stints from 1996-2000 and 2004-08. In 17 Major League seasons, he's hit .278 with 271 home runs and 1,116 RBIs.
"We spoke of adding some veteran presence to our ballclub this offseason," general manager Jack Zduriencik said. "In Raul we have a player and person with outstanding leadership skills who has participated in postseason play the last several years. We will give Raul the opportunity to come in and compete and add an additional veteran presence to this ballclub."
Ibanez hit .240 with 19 doubles, 19 home runs and 62 RBIs in 384 at-bats last year for the Yankees, then played a big role in the postseason when he slugged three home runs and five RBIs while hitting .318 (7-for-22), including homers in the bottom of the ninth and 12th innings of a dramatic Game 3 victory over the Orioles in the American League Division Series.
"Raul is a pro player with tremendous presence both on the field and in the clubhouse," said Mariners manager Eric Wedge.
Ibanez said he's been told he'll compete for playing time in left field as well as some first base and designated hitter duties.
If he appears in a game this season, he'll join Mike Blowers (1992-95, 1997, 1999), Norm Charlton (1993, 1995-97, 2001) and Jeff Nelson (1992-95, 2001-03, 2005) as the only players to have three stints with the Mariners.
The Mariners have now traded for first baseman/designated hitter Kendrys Morales and infielder Robert Andino and signed free-agent outfielders Jason Bay and Ibanez in an effort to add more experienced hitters to a young roster this offseason.