He denied that the move was in response to a court ruling in France that Yahoo! must prevent Internet users there from accessing its websites that sell such material.
The sale of Nazi memoriabilia is illegal in France.
Yahoo! said it would also ban the sale of items that promote hate groups. such as the white supremicist Ku Klux Klan.
Software
From 10 Jaunary, Yahoo! will screen items before they are listed for sale in its online auctions.
Software programmes will weed out any item that appears to violate the new policy, but users will be able to appeal against bans.
Although there would be some grey areas under the new policy, a Yahoo! spokesman said that items sold recently - such a watercolour painted by Adolf Hitler, or a recruiting poster for the SS - would now be banned.
The list of banned items at Yahoo! auctions includes cigarettes, live animals and used underwear.
French ban
Last year, two French groups sued Yahoo!, accusing it of breaking French laws which forbid the display or sale of racist material.
In November, a French judge ruled in November that Yahoo must prevent French users from taking part in auctions of such items, or face fines of $13,000 a day.
Yahoo! then appealed to a US court against the decision, saying that France did not have jurisdiction in the case.
The company says it will continue its legal appeals against the French ruling, despite its latest move.
Yahoo! said that the ruling would have a "significant chilling effect on the freedom of expression for users of Yahoo! and other US-based ISPs".
"The case continues because there's an important issue at stake," said Michael Traynor, one of Yahoo!'s lawyers.
"It's one thing to do something voluntarily, but it's another to be ordered to be ordered to do something."
He added that Yahoo! barred the Nazi sales because "the company shared a general concern about hate speech."
"But the company also is concerned about freedom of speech, which is why we will continue to fight the French court's order," said Mr Traynor.
Technical issue
Yahoo! have also argued that it was technically impossible for it to prevent users from one country accessing material on its site.
eBay, another online auction service, bans hate materials only countries where their sale is illegal, such as France, Germany, Austria and Italy.
Sellers may not deliver such items there, and buyers from those countries may not bid for them.
On Dec. 21, the company asked a U.S. court to block the order, saying France doesn't have jurisdiction.