Yahoo's share price is well below the $31 Microsoft offered for it in February
Yahoo has reached an agreement with the activist investor Carl Icahn that will stop him trying to replace its board.
Mr Icahn was annoyed that Yahoo had resisted Microsoft's attempts to take it over.
He planned to replace the board at next month's annual meeting and then sell the company to Microsoft.
Yahoo's board will now be expanded from nine members to 11, comprising Mr Icahn and two of his nominees along with eight of the original members.
Mr Icahn, who owns 5% of Yahoo's shares, said that he would now withdraw his other nominees from the firm's annual meeting on 1 August
In a statement, he said that the sale of the company still merited "full consideration".
Last week, Yahoo angrily rejected a joint takeover offer for the company from Microsoft and Mr Icahn, describing the alliance as "odd and opportunistic".
Microsoft offered $31 a share for Yahoo in February but Yahoo has said it will only consider an offer of at least $37 a share.
On Friday Yahoo's shares closed at $22.45.