Thompson's reported impending exit follows a scandal -- an error found on Thompson's resume -- stirred up by activist shareholder Daniel Loeb, a co-founder of Third Point, a significant shareholder.
Third Point revealed the mistake on Thompson's resume while pushing to replace four board members at Yahoo! with four directors chosen by Third Point, including Loeb.
Third Point, instead, has negotiated to replace three board members and Thompson is to be replaced by Ross Levinsohn, Yahoo's global media head, AllThingsD reported Sunday.
Five Yahoo! board members, who were expected to leave their posts after Yahoo!'s annual shareholder meeting this summer will step down effective immediately.
In a scandal referred to as "Resumegate," it was found that Thompson's resume included a college degree in computer science that he never earned.
The discovery was followed by a series of responses that dug the hole even deeper for the CEO.
First, Yahoo! called the error an inadvertent mistake. Thompson later apologized for the distraction caused by the controversy, but not for the mistake.
Thompson also blamed the headhunting firm Heidrick and Struggles for the error. That firm responded with a note that said Thompson's claim was "verifiable not true."
The headhunting firm informed the Yahoo! board that it was in possession of a resume handed in by Thompson that included the false claim.