In a letter to the board that was also released to reporters, Icahn said he no longer sees a need for an activist investor at Yahoo. He praised the work of Yahoo CEO Carol Bartz and said the search deal Yahoo struck with Microsoft would "provide great long-term benefits, the potential of which many still do not understand."

Icahn was one of Yahoo's most vocal critics last year, when he pushed for the removal of Jerry Yang as CEO and for Yahoo to accept an unsolicited acquisition offer from Microsoft. He accused Yang and the board of acting against the interests of Yahoo's shareholders, at one point referring to them as "self-destructive doomsday machines."

Yahoo has since replaced Yang with Bartz and entered a 10-year search and advertising deal with Microsoft. Part of the deal calls for Yahoo to use Microsoft's Bing search engine to power Yahoo's results.

"When I joined the board, the company was in a state of turmoil. In the period since then, we have all worked together to achieve much for the company, most notably bringing Carol on to be the CEO and then consummating the search deal with Microsoft," Icahn wrote in the letter.

He said he was "proud to have played a role in both these decisions."