SAN FRANCISCO — Yahoo Inc. averted a showdown with a rabble-rousing investor, Carl Icahn, today by giving him three seats on its board of directors in a truce that still leaves the door open for a possible sale to Microsoft Corp.

The compromise spares Yahoo from more bickering with Mr. Icahn, an acerbic billionaire who had spent the past two months spearheading a rebellion to replace the Internet company’s entire board in retaliation for its rejection of Microsoft’s $47.5 billion takeover bid in May.

The duel had been scheduled to culminate in a shareholder vote at Yahoo’s Aug. 1 annual meeting.

It now appears there will be fewer fireworks at that gathering, although some Yahoo shareholders are still expected to vent about the board’s inability to get a deal done with Microsoft after six months of wrangling.

The main order of business will be the cease-fire giving Mr. Icahn three of the 11 seats on Yahoo’s board, which will be expanded to make the deal possible.

Eight of Yahoo’s current nine directors will be retained, leaving the company’s current regime — headed by its chairman, Roy Bostock, and chief executive, Jerry Yang — in the driver’s seat.

The CEO of video game maker Activision Blizzard Inc. and a Yahoo director for the past five years, Robert Kotick, will surrender his seat as part of the agreement.

But the compromise, negotiated over the weekend, doesn’t necessarily settle Yahoo’s fate, which has been unclear since Microsoft made its first unsolicited offer in January.

Mr. Icahn, who owns a 5% stake in Yahoo, emphasized he still believes a sale of all or part of Yahoo may still be the best way for the Sunnyvale, Calif.-based company to lift its sagging stock price.

And with more than $1.5 billion invested in Yahoo, Mr. Icahn isn’t likely to be satisfied with the status quo. He paid an average of about $25 per share for his Yahoo holdings, meaning he will sustain a loss unless the company’s stock perks up.

Yahoo shares fell 68 cents to $21.77 in this afternoon trading — well below the $33 a share that Microsoft’s CEO, Steve Ballmer, dangled in early May before withdrawing the bid after Mr. Yang sought $37 per share.

Mr. Icahn’s involvement on corporate boards hasn’t always paid off. For instance, he won three board seats at Blockbuster Inc. in May 2005 and, since then, the movie rental chain’s stock price has plunged by about 75%.

Microsoft didn’t respond to requests for comment today, but has previously indicated it remains interested in exploring a deal with Yahoo, especially if the negotiations were handled by a new board.

Having been repeatedly rebuffed by Yahoo so far, Microsoft has been reported to be discussing a possible acquisition of Time Warner Inc.’s AOL. Microsoft wants to strengthen its Internet business to challenge Google Inc.’s dominance of the online search and advertising market.

Standard and Poor’s Internet analyst, Scott Kessler, doubts Microsoft will buy Yahoo, but interpreted the Icahn agreement as a sign that the current board realizes it needs to shake things up even more than Mr. Yang has already done since he became CEO 13 months ago.

“It makes it more clear to shareholders that Yahoo’s board is amenable to new ideas and is willing to do what’s necessary to get the business back on track,” Mr. Kessler said.

Some shareholders still want more even more new faces on Yahoo’s board after watching the company’s market value plummet by more than 40%, or about $20 billion, since the end of 2005. All but one of Yahoo’s directors — Maggie Wilderotter — have been on the board since 2005.

“I am still very angry at this board and I am sure other shareholders feel the same way,” the manager of a hedge fund, Ironfire Capital, Eric Jackson, said. Ironfire Capital is organizing a protest on behalf of about 150 Yahoo stockholders with about 3.2 million combined shares,

Mr. Jackson said his group plans to punctuate its displeasure by opposing the re-election of four Yahoo incumbents — Mr. Bostock, Ronald Burkle, Eric Hippeau, and Arthur Kern. More than 30% of Yahoo’s shareholders voted against Mr. Bostock, Mr. Burkle, and Mr. Kern at last year’s annual meeting, with Mr. Jackson leading the fight.

The shareholder angst could intensify if Yahoo’s second-quarter earnings, due tomorrow, disappoint Wall Street. Analysts are bracing for a letdown after Google and Microsoft indicated last week that the deteriorating economy is hurting the online ad market.

After spending weeks ridiculing Mr. Yang and the rest of Yahoo’s board, Mr. Icahn apparently realized he had little hope of gaining control of the company.

Things began to unravel July 12 when Yahoo rejected Microsoft’s latest proposal to buy its online search operations in a complex deal assembled in concert with Icahn.

Then, on Friday, Legg Mason Capital Management Inc. became the first major Yahoo shareholder to publicly declare its support for the incumbent board. Legg Mason, which controls 4.4% of Yahoo shares, also encouraged Yahoo and Mr. Icahn to negotiate a compromise.

Yahoo’s new board may include a possible successor to Mr. Yang, whom Mr. Icahn had threatened to fire if his attempted coup had been successful.

Besides taking a board seat himself, Mr. Icahn will be able to recommend two other directors who must also be accepted by Yahoo’s nominating committee.

To fill those spots, Mr. Icahn will choose from the eight men he had already nominated and one new candidate — the former CEO of Yahoo rival AOL, Jonathan Miller. Mr. Miller is the kind of seasoned CEO that Mr. Icahn envisioned for Yahoo.

But throwing Mr. Miller into the mix of Yahoo’s new directors was Mr. Yang’s idea, according to a person familiar with the discussions who asked not to be identified because the talks were considered confidential.

While sparring with Mr. Icahn and Microsoft, Mr. Yang had also been talking to Mr. Miller — a partner at the technology investment firm Velocity Interactive Group — and decided he would be a valuable addition to the board, this person said.

Mr. Icahn didn’t return a call seeking comment today.

Mr. Yang, who co-founded Yahoo at Stanford University in 1994, has been trying to steer a turnaround. He believes Yahoo can dramatically accelerate its revenue growth in the next two years by extending the reach of its ad network and relying on Google’s superior technology to sell some ads for Yahoo’s site.

Mr. Icahn seems unlikely to back off his criticism of Mr. Yang, Mr. Kessler said, although his misgivings may now be expressed more privately.

“I don’t think that Carl Icahn suddenly stopped believing what he has been writing and saying the past few weeks,” Mr. Kessler said. “I think you are going to see a process unfold where you could see a change at the top of Yahoo.”