Icahn's broadside opened a letter to Yahoo stockholders accompanying his filing of a proxy statement with the SEC nominating a full slate of candidates to replace the company's current board of directors.
The proxy fight will come to a head when shareholders vote whether to support the existing board or Icahn's alternate group at Yahoo's annual meeting Aug. 1.
Yahoo rebuffed Microsoft's latest proposal, which would have given the software giant control of Yahoo's search business while leaving Icahn with control over the rest of the company.
Yahoo accused Microsoft and the billionaire investor of forcing the Web portal to sell assets to support an "odd and opportunistic" alliance that does not have the best interests of shareholders in mind.
"Carl Icahn and Microsoft presented us with a 'take it or leave it' proposal," Yahoo Chairman Roy Bostock said in a statement over the weekend. "It is ludicrous to think that our board could accept such a proposal."
Yahoo indicated it would be willing to sell the entire company for $33 a share, the last price Microsoft offered in early May.
In his letter Monday, Icahn maintains that the proposed deal for Yahoo's search business is in the interest of shareholders because it would help boost the current value of shares by guaranteeing $2.3 billion annually in search revenue for the next five years.
"I believe that, just like the $33 per share offer that was refused by Yahoo in early June, refusing the Microsoft offer for the Yahoo search business is also another grave mistake that will be deeply regretted," wrote Icahn, who holds a nearly 5% stake in the company with partners.
Yahoo issued its own letter Friday reiterating its rejection of the latest Microsoft offer as averse to shareholder interests and financially inferior to its recent search agreement with Google.
In addition to himself, Icahn's nine board candidates include: Lucian A. Bebchuk, Frank J. Biondi, Jr., John H. Chapple, Mark Cuban, Adam Dell, Keith A. Meister, Edward H. Meyer and Brian S. Posner.
Rather than immediately replacing the current board and top management, Icahn said in his letter that he and Microsoft had been willing to discuss keeping on "a number of current board members and Jerry Yang as Chief Yahoo."