The business, which was formerly handled by Carat, is estimated to be worth between EUR15 million and EUR20 million.
ZenithOptimedia's specialist digital unit picked up the business in a shoot-out against Isobar and the independently owned eSearchVision.
The agency will be responsible for the planning and buying of all Yahoo!'s sponsored links across the major search engines, including MSN and Google. It will also handle all Yahoo!'s performance-based buying and search engine marketing across Europe.
Frederic Joseph, the chief executive of Zed Digital Europe, said: "I've been working for the past 12 months on the reorganisation of our search engine marketing units across Europe, with one key target: to ready ourselves to win Yahoo!."