The deal will let users of its email; photo sharing and other online products link their content and activities directly into Facebook for the first time, using the Facebook Connect system. The deal is expected to take effect from early next year worldwide.
Advertisers will benefit from the deal through better targeting features using the Facebook Ads network.
Earlier this year, Yahoo! allowed users to preview messages from their Facebook friends directly on the Yahoo! homepage, as part of a broad revamping of the Yahoo! front page.
The search provider says it is teaming up with Facebook to tap the popularity of social networking and drive people back to the Yahoo! home page.
Facebook Connect was introduced last year enabling users to automatically log on to participating sites with their Facebook credentials. It also allows people to notify their Facebook friends about their activities on third-party Web sites.
Yahoo!’s move comes as the company seeks to revive its growth under the leadership of chief executive Carol Bartz, who took the reins in January and signed a deal with Microsoft in July to partner with its Bing search engine.
Facebook now has more than 350 million users globally and has pledged to continue to improve members’ privacy with several changes to its policy.