He added in a reaction statement that the payments industry "must be consolidated" and PayPal should make acquisitions or merge with "another strong player in the industry," especially with strong competition from Apple Pay.
Icahn added that he intended to have discussions with John Donahoe, who will step down as eBay's CEO when the split takes effect in 2015.
Earlier in the year, Icahn had pressured Donahoe to separate PayPal's growing payments business from eBay's online marketplace. Donahoe and eBay's board had resisted, and even won a proxy fight, but just a few months later decided during the company's annual strategic review that a split was appropriate.
Earlier Tuesday, hedge fund Third Point announced that it is "very pleased" with the online auction company's decision.