Yahoo faces a proxy fight for control of the company by a billionaire activist with a history of closing controversial corporate deals.
Carl Icahn has announced he will file a slate of alternate directors to replace the present board when it gets together for its shareholder meeting on 3 July.
Mr Icahn purchased 50 million shares in Yahoo after Microsoft walked away from talks in May to buy the net portal.
Yahoo told the BBC it would "pass" on the opportunity to comment on the move.
Mr Icahn has been unavailable to discuss his plans but news reports say he has lined up at least 12 potential board candidates. The deadline for nominating a dissident board is 15 May.
Mr Icahn's manoeuvre follows much anger and criticism over Yahoo's decision, led by co-founder and chief executive Jerry Yang, to turn down Microsoft's $47.5bn (£24.4bn) offer earlier this month to buy the company. Yahoo had wanted Microsoft to increase its bid of $33 a share to $37.
The Wall Street Journal says that over the last few days some large Yahoo shareholders have contacted Mr Icahn, urging him to get involved.
Bill Miller of Legg Mason, Yahoo's second largest shareholder, says he is eager to see what Mr Icahn and other activists can do.
"To the extent he can get the parties back to the table I'd be all in favour of that."
But he maintains that unless that happens, "it will be a lot of wasted time and effort".
News of Mr Icahn's involvement in the "Yahoo soap opera certainly raises the heat of the situation" says Shirley Westcott, managing director of policy at Proxy Governance, an independent proxy advisory firm.
She told the BBC she believes his emergence as a player will add to the pressure the Yahoo board is being put under to go back to Microsoft and restart talks.
"When Microsoft backed off there was a lot of investor anger and now Carl Icahn is sabre rattling there will now be more pressure on Yahoo to renegotiate with Microsoft. There needs to be a meeting of minds."
For the last 24 hours, Silicon Valley and the investor community have been waiting on tenterhooks to see if Mr Icahn would go ahead with a decision to launch a proxy fight to oust Yahoo's current board.
Now that he has, the focus will shift to Microsoft - which has already said talks with Yahoo are over and that it will go it alone in trying to establish a presence in the world of search.
As Bill Gates and executives of the Redmond-based company played host at a CEO summit, the only word from the company was: "Microsoft does not comment on rumour or speculation".
Mr Icahn's proxy fight is not the only effort being waged to replace the present board of directors at Yahoo.
Disgruntled investor Eric Jackson is launching his own grassroots "vote no" campaign urging shareholders to oust all 10 directors on 3 July.
Mr Jackson, who runs Ironfire Capital, had originally threatened to run a proxy campaign to elect new members. He says a million-dollar fight that he could not afford forced him to switch tack.
"I want to send a message to all board directors that they are accountable and need to be replaced."
In an interview with BBC News, Mr Jackson claims there is a "high level of anger and confusion at the board's decision to turn down Microsoft's offer".
This, he contends, was a major mistake and one of many the board has made over the years.
"Yahoo's stock has essentially been flat for the last four years while the market has gone up over 30% and Google has gone up 440%. So the comparisons are stark and the board has not been doing its job."
Over the next seven weeks, Mr Jackson's "vote no" campaign will rally support through the web and by hitting the phones.
Ms Westcott at Governance Proxy says while Mr Jackson's campaign will fire up small shareholders, the vote that will really count is that of the big players.
"I think there are plenty of shareholders who will oppose the re-election of this board, and this grassroots campaign will have a lot of success, but it is the institutional investors who will carry the day."
And it is those investors that Mr Icahn is expected to carry.
For any director to be voted off or on to the board, all it takes is a simple majority vote.
"If there is no progress between Yahoo and Microsoft over a deal you could end up with enough angry shareholders and institutions voting the whole board out of office," Ms Westcott says.
"And that would be a horrible scenario for Yahoo."
Mr Icahn is no stranger to such battles. Earlier this year he was instrumental in persuading BAE Systems, a San Jose software maker, to accept an offer to be bought by Oracle for $8.5bn. In March he pressured Motorola to split into two companies.
While he has a reputation for shrewd deals, even he cannot win over management all the time. But he mostly always makes money.
In 2006 he unsuccessfully pushed for the break up of Time Warner. In a recent interview on America's 60 Minutes programme he said: "Maybe I made a mistake, but I made $300m on it. So is that so bad?"