The hammer fell above the closing bell for Yahoo! employees.
The cuts will take place over the next two months to help employees cope and are a direct result of a crumbling economy that dented its third-quarter profit.
This will be Yahoo's second round of mass cutbacks this year as management tries to end a three-year slump that has hammered the Internet company's stock price.
The situation got worse in the third quarter as Yahoo earned $54.3 million, or 4 cents per share, plunging 64 percent from $151.3 million, or 11 cents per share, last year.
That is a penny a share better than Wall Street predictions.
The profit fell short of the 9 cents per share forecast by analysts polled by Thomson Reuters.