The Dodgers plan on using Young, 36, as a bench player who can spell third baseman Juan Uribe and first baseman Adrian Gonzalez as well as pinch hit. He is batting .272 with eight home runs and 41 RBIs this season.
The Phillies will receive minor league left-hander Rob Rasmussen, who is 3-4 with a 2.55 ERA at Double-A Chattanooga.
Young's postseason experience and reputation as a team leader appealed to the Dodgers.
"I think he's a professional player that's got a chance to help us," said Dodgers general manager Ned Colletti. "We've got a long way to go and, when you can add people this time of year who bring what he brings, you act. We've gone for it, we'll continue to go for it."
The Dodgers will owe Young about $1 million of his $16 million salary. They received cash from Philadelphia, the same, prorated amount the Texas Rangers were paying of Young's salary. He is a free agent after the season.
The deal was finalized about 15 minutes before Saturday night's deadline for players to be eligible for the postseason roster.
Young, who reportedly cleared waivers earlier this month, has a full no-trade clause, and said before the July 31 trade deadline he was only willing to waive it for a return to the Texas Rangers. But he softened that stance when the New York Yankees and Boston Red Sox were rumored to have interest. He is a native of Covina, Calif., about 20 miles east of Dodger Stadium.
"This is a guy that can hit. He makes us stronger, gives us more options," Dodgers manager Don Mattingly said. "What we're doing is working. We like the guys that we have. Michael just adds to it."
The Dodgers went into this season with Luis Cruz as their everyday third baseman, but abandoned that plan when Cruz batted .127 in 45 games for them. Uribe inherited the job and had helped stabilize the left side of the Dodgers infield by playing excellent defense while batting .268 with seven home runs and 37 RBIs going into Saturday.
"I'm not mad," Uribe said. "I came into the year without a position. I do my job and play when the manager tells me to play."
Young and Uribe went into Friday night with the identical OPS of .722, but Uribe is a superior defender.
To make room on their 40-man roster, the Dodgers transferred pitcher Josh Beckett to the 60-day disabled list.