Encarnación grew up in Baní where he was friends with Miguel Tejada. Encarnación dropped out of school at 15 years old to focus on baseball.: 114  In 1994, he signed a contract with the Oakland Athletics at the purported age of 16. Before traveling to the United States to play in Oakland's farm system, Encarnación borrowed and read psychology textbooks so that he could learn "how to talk to gringos." He also bought his mother her first telephone.: 167 
Encarnación was assigned to the West Michigan Whitecaps of the Midwest League to begin his professional career in 1996. In 1999, he won the Triple-A World Series with the Vancouver Canadians. By that December, he was described in the Los Angeles Times as Oakland's "best position-player prospect." He was so highly regarded by the Athletics that they declined a trade for All-Star outfielder Jim Edmonds in December 1999 reportedly because it would have required them to part with Encarnación. Prior to the 2000 season, Baseball America ranked him the 90th-best prospect in baseball and the best position player prospect in the Oakland system. Shortly before the trade deadline in 2001, the Athletics traded Encarnación to the Colorado Rockies in a three-team deal that netted them Jermaine Dye from the Kansas City Royals.
On August 26, 2001, the Rockies added Encarnación to their Major League roster for the first time following an injury to outfielder Mark Little. He made his debut that afternoon against the Milwaukee Brewers at Miller Park. Though hitless in his debut, he walked in his first plate appearance against Rubén Quevedo and later walked and stole a base against Chad Fox and Henry Blanco. He would be a regular in Colorado's outfield for the remainder of the season alongside Juan Pierre and future Baseball Hall of Famer Larry Walker.

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