Seattle also acquires cash considerations from Tampa and a competitive balance draft pick from Cleveland.
The money exchanged in the trade is $5 million from Tampa to Seattle and $6 million from the Mariners to the Indians, sources told The Athletic's Ken Rosenthal.
After making the trade, Seattle saves $9 million. Meanwhile, the Indians get Santana for two years and $29 million, which is $4 million more than they owed Encarnacion for one year, Rosenthal summarizes.
The three-team trade is another in a long line of offseason deals made by Mariners GM Jerry Dipoto, who has already traded James Paxton, Robinson Cano, Edwin Diaz, Jean Segura, Alex Colome, and Mike Zunino.
Dipoto reportedly finalized the trade from a hospital bed after making a cautionary trip to a Las Vegas facility during the winter meetings.
Encarnacion hit 32 home runs with 107 RBIs over 137 games in 2018. He's expected to make $20 million over the last season of a three-year contract he signed prior to the 2017 campaign, although his deal does include a $5-million buyout in 2020.
Santana - a former Indians player - had recently been acquired by Seattle in the deal that sent Segura to the Phillies.
During his lone season in Philadelphia, the 32-year-old hit a career-low .229 but maintained a .352 on-base percentage. His contract runs through 2020, with $34.5 million remaining, and includes a 2021 team option for $17.5 million with a $500,000 buyout.
Bauers, who debuted in the majors last season, appeared in 96 games and posted a .201/.316/.384 slash line with 11 homers, 22 doubles, and 48 RBIs.
The 27-year-old Diaz has played 88 games for the Indians over the past two seasons, hitting .283/.361/.366 with 28 RBIs.