The Angels, who signed power-hitting Josh Hamilton to a free agent contract last week, sent some much-needed punch to Seattle to add lefthander Vargas to a rotation that includes Jered Weaver, C.J. Wilson, Tommy Hanson and Joe Blanton.
"We have been focused on adding offense this offseason, and feel that Kendrys will be a middle-of-the-order bat for us," Seattle General Manager Jack Zduriencik said in a report on Major League Baseball's website.
"He's a switch-hitter with power who has played - and hit - in the AL West. He's familiar with the teams and parks and is a proven run-producer."
Seattle was last in the American League in runs scored with 619, 148 fewer runs than third-best Los Angeles.
The Cuban-born Morales, 29, hit .273 with 22 home runs and 73 RBIs last year in 134 games in his first season back after missing all of 2011 with a broken left leg.
Before his injury, suffered when he landed awkwardly while jumping into a group of team mates after hitting a walk-off grand slam homer, Morales was one of MLB's emerging sluggers after hitting .306 with 34 home runs and 108 RBIS in 2009.
The trade of Morales freed up some lineup space for 26-year-old Mark Trumbo, who hit 32 home runs with 95 RBIs for the Angels last season bouncing between the outfield, first base, third base and designated hitter.
Vargas, also 29, pitched the last four seasons with Seattle, posting a 36-42 record with a 4.09 ERA. The lefty, who went 14-11 with a 3.85 ERA last season, was a Mariners workhorse, logging more than 200 innings in each of the last two years.
He has pitched well in the past at Angel Stadium, registering a 3-1 record with a 2.27 ERA in seven career outings in the ball park.
The deal involved two players entering their final season of arbitration eligibility, with both set to become free agents after the 2013 season.
(Reporting by Larry Fine in New York; Editing by Frank Pingue)