Yahoo has agreed to give activist investor Carl Icahn a seat on its board of directors and the power to nominate two further directors.

The move comes after Icahn and Microsoft discussed a fresh bid for the company last weekend, and seems to be designed to prevent a hostile takeover.

Icahn has nominated Jonathan Miller, former chief executive of AOL, as one of the chosen directors.

The deal means that Icahn and his two nominated directors will have to work closely with the six remaining board members, including chief executive Jerry Yang, whose resignation Icahn has repeatedly called for.

Icahn has been critical of the Yahoo board over its refusal to accept Microsoft's hostile takeover bid and had planned to oust the entire board at the search firm's annual general meeting in an attempt to force further discussions with Redmond.