Internet portal Yahoo announced the resignation of Terry Semel.
Semel was replaced by co-founder Jerry Yang, effective immediately. Susan Decker, Yahoo's head of advertising and former chief financial officer, was also named president.
Semel, 64, has served as the company's chief executive since 2001 and will take on the role of non-executive Chairman, the company said in a release issued after Monday's close of trading.
"I believe Jerry and Sue, with their superb talents and intense dedication to Yahoo! and its people, are the perfect combination to carry us forward," Semel said in a prepared statement.
"This is the time for new executive leadership, with different skills and strengths, to step in and drive the company to realize its full potential -- it is the right thing to do, and the right time is now."
Shares of Yahoo rose sharply in after-hours trading.
Yang, 38, founded the company in 1994 with David Filo and serves on the board of directors, in addition to holding the title of "Chief Yahoo" overseeing the company's strategy and technological vision.
In a conference call with analysts held Monday afternoon, the company said it is seeing slower growth in display advertising --which include banner ads and videos -- but better-than-expected performance from its recently re-tooled search advertising business.
The company said it expects revenue in the current quarter at the low to middle of previous guidance.
Last week, Yahoo shareholders voiced their displeasure with the company's recent performance, voting against board-nominated directors at Yahoo's annual meeting.
Nearly a third of votes for at least one board member were cast against his election, an unusually high protest, even though all 10 candidates were elected.
Proposals opposed by the board that aimed to tie executive pay to competitive performance and challenge the company's human rights policies in China were defeated.
Earlier today, CNBC's David Faber reported that industry sources told him the company may need to explore strategic alternatives.
"It's certainly true that they are in a tough position right here and in a position of weakness so I think there are some people circling around it," Jim Friedland, an Internet analyst with Cowen and Co., told CNBC. "Given the weakness Yahoo has been experiencing, I think now is the time those talks become more real."
However, the analyst noted that forging a strategic deal with the likes of News Corp., Time Warner or Microsoft may not be in the company's best interests.
Addressing such speculation, Yang said Monday the company's board believes Yahoo should remain independent.