Thompson, who took over the reins of once-dominant Yahoo in January, came under fire from an activist investor Daniel Loeb who alleged that the CEO misrepresented his educational qualifications.
Adding another twist to the resignation saga, a media report has said that Thompson has been diagnosed with thyroid cancer, another factor that made him quit the company.
Yahoo, late on Sunday, announced the resignation of Thompson and he would be temporarily replaced by Ross Levinsohn, who was in charge of content and advertising services.
Levinsohn would manage the company's day-to-day operations with assistance from the senior leadership team.
Faced with declining market fortunes, Yahoo's management has also been navigating troubled waters as testified by the shunting out of previous CEO Carl Bartz in September last year. Way back in 2009, the Internet firm's founder and CEO Jerry Yang too made an unceremonious exit.
Apart from the top-level shuffle, Yahoo has named Fred Amoroso as chairman of the board of directors, replacing Roy Bostock.
Besides, the board has reached an agreement with activist investor Daniel Loeb's hedge fund Third Point LLC, that holds 5.8 per cent stake in the Internet firm. Three nominees of Third Point