In a statement, the global media company said it withdrew services from the country "in recognition of the increasingly challenging business and legal environment”.
The move has been a long time coming. Access to many of Yahoo's features in China have vanished since 2013, including email and news. In 2015, Yahoo closed its Beijing office and eliminated roughly 300 jobs.
The final straw for Yahoo may have been the introduction of the Personal Information Protection Law of the People’s Republic of China (PIPL), which came into effect on November 1.
The law means that overseas companies that store data in the country have to pass a security assessment organised by the national cybersecurity authority before transferring information across borders. This has huge implications for the company's marketing model.
While not directly attributing the exit to strict governmental controls over private companies, the company did allude to China’s sweeping regulatory crackdown on the technology, education, gaming and entertainment industries that has taken a large chunk of market value away from major firms.
"Yahoo remains committed to the rights of our users and a free and open internet. We thank our users for their support," it said.
Yahoo joins Microsoft's LinkedIn social network, which announced last month that it would leave China because of a "significantly more challenging operating environment and greater compliance requirements in China."
Once a global market leader and internet pioneer, Yahoo’s popularity in online search fell in the 2000s, as Google increased its global market share and Baidu emerged as the dominant search engine in China. The firm is now 90 percent owned by investment funds managed by Apollo Global Management and 10 percent by media conglomerate Verizon Communications.
Yahoo, which launched its Chinese internet operations in 1999, was an early investor in Chinese e-commerce giant Alibaba. Several years later, Yahoo returned $3billion to shareholders after selling back about half of its massive stake in Alibaba for $7.1billion.