Under its new project code named 'Minty', the internet giant aims at not only revamping its user interface but also seeks to enhance its performance when net connections are slower.
Studies have found that users were ditching Yahoo Mail and migrating to services offered by Google and Microsoft.
According to ComScore, Yahoo Mail saw its users dropping 11 per cent in 2010 compared to 2009 internationally, while Hotmail and Gmail gained ground.
Yahoo hopes to address the issue of users migrating to other email services with its 'Minty' project, which comes after Microsoft redesigned Hotmail in May 2010, and Gmail's latest offering of Priority Inbox feature.
The new 'Minty' Yahoo Mail user interface, designed to improve Yahoo Mail's current design and better integrate social networking out of the box, is reportedly being tested internally in Yahoo.
The 'Minty' UI is expected to be released to beta testers by end of 2010.