Yahoo Inc. co-founder and Chief Executive Jerry Yang will step down after the company finds a replacement, closing a tumultuous and short tenure during which Yahoo rejected an offer from Microsoft Corp.'s to buy it.

Yahoo Chairman Roy Bostock and Mr. Yang, who will stay on as a senior executive and board member, have been discussing for weeks the possibility the CEO might step aside, said people familiar with the matter. His impending exit leaves much unresolved for the Internet company, which has been fighting a battle to...