"Yahoo has faced several challenges in the past couple of years and decided to pull out of the (Korean) business to put more resources on global business and become more powerful and successful," Yahoo said in a statement.
Yahoo Korea, which started business in 1997 and is wholly owned by the U.S. search company, has around 200-250 employees in South Korea. It will terminate Korean online portal services in December, the company said.
In the South Korean market, it has failed to beat local rivals such as NHN Corp, Daum Communications Corp and SK Communications Co.
Yahoo appointed Google veteran Marissa Mayer as its chief executive in July, its third CEO in less than a year.
Former CEO Scott Thompson resigned after less than 6 months in the job over a controversy over his academic credentials.
Before that, Yahoo co-founder Jerry Yang had stepped down as CEO, and an internal reorganisation cut thousands of jobs.
Yahoo remains one of the world's most powerful websites, with more than 700 million monthly visitors who use products like its email service and read its news pages.