Icahn, the corporate raider who specialises in shaking up under-performing companies, has purchased a 3.5% stake in Yahoo since Microsoft withdrew its offer to buy the company last week, and is looking to pressure the company into reopening talks with Microsoft.
In a letter to Yahoo's board he said: “During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched.
"I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and, more importantly, would be a force strong enough to compete with Google on the internet."
The corporate activist has reportedly asked 12 people whether they would be willing to serve on the Yahoo board if asked, and he could try to take control of Yahoo by unseating the entire 10-person board. Among those asked is former Viacom chief executive Frank Biondi, according to reports.
Confronting Yahoo's board would not be the first time that Icahn has accumulated stakes in companies he felt have let down their shareholders.
In recent years, Icahn has pressured the firms such as Blockbuster, Motorola and Oracle into strategic shake-ups.