Yang, 40, assumed the CEO role at the Board's request in June 2007. He has led Yahoo through a strategic repositioning and transformation of its platform.

"From founding this company to guiding its growth into a trusted global brand that is indispensable to millions of people, I have always sought to do what is best for our franchise," Yang said in a statement. "When the Board asked me to become CEO and lead the transformation of the Company, I did so because it was important to re-envision the business for a different era to drive more effective growth. Having set Yahoo on a new, more open path, the time is right for me to transition the CEO role and our global talent to a new leader. I will continue to focus on global strategy and to do everything I can to help Yahoo realize its full potential and enhance its leading culture of technology and product excellence and innovation."

Chairman Roy Bostock, working with the independent directors and in consultation with Yang, will lead the process of evaluating potential candidates and determining finalists for consideration. The search will encompass both internal and external candidates, and the Board has retained Heidrick & Struggles, an international executive search firm, to assist in the process.

"Over the past year and a half, despite extraordinary challenges and distractions, Jerry Yang has led the repositioning of Yahoo on an open platform model as well as the improved alignment of costs and revenues," said Bostock via a statement. "Jerry and the Board have had an ongoing dialogue about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level. We are deeply grateful to Jerry for his many contributions as CEO over the past 18 months, and we are pleased that he plans to stay actively involved at Yahoo as a key executive and member of the Board."

Yahoo has had its problems in 2008. Earlier this year, Yang failed to reach a deal for Microsoft to acquire Yahoo. Then the collapse of Yahoo's advertising partnership with Google also left the industry wondering if it would regain its footing.

"I think Yahoo had a tremendously strong brand online," according to a source close to the company who requested anonymity. "Display ads used for direct response--that's the business it was in when times were good--but I think Yahoo lost its way and focus. It had a strong brand and they turned away from it. It's too bad to see this situation happen."

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