SAN FRANCISCO — Yahoo CEO Jerry Yang will step down as head of the Internet company he helped found, the company said late yesterday.

Yang, 40, took over as chief executive at the request of Yahoo's board in June 2007 to lead the company through a strategic overhaul. But the path was bumpy — especially after Yahoo spurned a $47.5 billion takeover bid by Microsoft, and a potential online-ad partnership with Google fizzled.

Yang will remain CEO until a replacement is found and will continue to serve on the board. He had been in discussions with the 11-member board of directors for "some time" about the move, Yahoo spokesman Brad Williams said.

"I have always sought to do what is best for our franchise," Yang said in a statement. "I will continue to focus on global strategy and to do everything I can to help Yahoo realize its full potential."

A new Yahoo CEO faces plenty of challenges, industry analysts say.

Yahoo's earnings have eroded for three years, leading to the announced layoffs of more than 1,500 workers last month.

"Yahoo has nowhere to go but up," says Chris Winfield, president of 10e20, a New York firm that helps small businesses with online marketing campaigns. "You have a site that's one of the top Web properties, used by over 100 million people daily, yet it's perceived to be floundering. This is a great fresh start."

Yahoo shares closed yesterday at $10.63. They rose 47 cents in after-hours trading on the news, released after markets closed.