Thompson was hired in January as CEO to replace Carol Bartz, who was fired by the board last September. Her blunt approach, complete with often colorful language in public speeches, was at first seen as a breath of fresh air for the ailing company, but that quickly changed.

Bartz was hired in 2009 to replace Jerry Yang, the company's co-founder who had stepped in to the CEO role in mid-2007.

Thompson quickly took steps to try to improve the company's ailing fortunes, cutting 2,000 jobs and making management changes. Yahoo's first-quarter sales figures beat analyst estimates and it also reported the first revenue increase in more than three years, bolstering hopes that the company was on the mend.

But Loeb found fault with Thompson's approach and began his public campaign in earnest to unseat the CEO, saying in April that Thompson should not have announced job cuts without having first provided more detailed plans for the company. He also argued that Yahoo should have accepted Microsoft's previous acquisition bid.\

News that Yahoo would soon announce Thompson's departure first broke on the All Things D blog published by The Wall Street Journal on Sunday, with The New York Times soon after reporting that the announcement could come as early as Monday. The board of directors reportedly held a conference call to discuss the matter Sunday.