The company informed employees of the decision on Wednesday which will be the first clear sign of cost-cutting implemented by new Chief Executive Carol Bartz, who was appointed last week.
Yahoo has been forced to tighten its belt after spending most of 2008 entangled in fruitless merger or partnership talks with Microsoft Corp, Google Inc and Time Warner Inc’s AOL.
Sunnyvale, California-based Yahoo has lost market share in search advertising while display advertising, where it is a market leader, has been badly hit by the U.S. recession.
However Yahoo, which employs around 13,700 employees and laid off 1,500 people last month, is not alone in cutting costs in the technology sector.
Microsoft said on Thursday it would lay off 5,000 workers and Google has significantly reduced the thousands of contractors it uses and also laid off 100 recruiters this month.