Vargas came into the game 5-1 with a Major League-best 1.01 ERA, but he gave up six runs and seven hits over four innings.
Right-hander Michael Pineda went six-plus innings for the Yankees and gave up six hits and three earned runs. He walked two and struck out five.
Royals catcher Salvador Perez hit a two-run homer, his eighth, and Whit Merrifield added a solo shot, his fourth.
MOMENTS THAT MATTERED
The game-changer: Vargas was still hanging on with two out in the fourth, trailing 2-0 with two out.