Yang, who became CEO in June 2007, will take on his former title of "Chief Yahoo" once a successor is found, and also remain on the board.

He has been under intense pressure from shareholders in recent weeks for a string of perceived missteps that began in February with Microsoft's US$45 billion offer to buy Yahoo. Microsoft was offering $33 per share for its Internet rival but Yang rejected that price as too low.

Eventually Microsoft withdrew its offer and Yang went on to talk with News Corp. about a venture with MySpace and with TimeWarner about a merger with AOL, but the talks came to nothing. In June he struck an advertising deal with Google but that too fell apart in the face of opposition from the U.S. Department of Justice.

With Yahoo shares closing under $11 on Monday, the Microsoft offer, with the benefit of hindsight, looks like a very attractive one, thus the discontent from some shareholders.

Yang appears to recognize this and at an Internet conference in San Francisco two weeks ago made a thinly veiled initiation to Microsoft to come back to the negotiating table.