Deputies searching Loaiza's auto found a "sophisticated" compartment for concealing contraband and obtained a search warrant for the home in Imperial Beach, California, that Loaiza had been renting since early February.
The former MLB All-Star, who pitched for the Yankees in 2004, was arrested with 44 pounds of what police believed to be cocaine, according to the San Diego County Sheriff's Department. The 46-year-old retired athlete did not speak in court but did look at his father and other family members before his defense attorney entered his not guilty plea.
Katz ordered Loaiza to remain in San Diego County if he posts bail, which had been set at $200,000 after his arrest Friday.
He has been booked on possession of over 20 kilograms of cocaine, possession of cocaine for sale and transportation of cocaine. Later they obtained a search warrant for the home he rented in the beach community of Imperial Beach, where officials say packages were found containing a white powder believed to be cocaine.
The three drug-related charges - which include a count of using a secret compartment to smuggle drugs - include allegations that the bulk of cocaine for sale weighed more than 20 pounds and was located within 1,000 feet from a school.
It was not immediately known if Loaiza had hired a lawyer and the former player could not be reached to comment.
He was married to singer Jenni Rivera, who died in a 2012 plane crash. Loaiza's best season came with the Chicago White Sox in 2003 when he won 21 games, recorded a 2.9 earned run average and finished second in American League Cy Young voting. She had filed for divorce shortly before her death.
Loaiza was a two-time All Star who won 126 games in his career, the second most for a Mexican-born pitcher behind Los Angeles Dodgers legend Fernando Valenzuela.