Users can now post updates to Facebook and Twitter as well as view photos and videos from Flickr, Picasa and YouTube without ever leaving Yahoo Mail.
"People spend more than 300 billion minutes a month on Yahoo Mail," the BBC quoted Dave McDowell, Yahoo Mail senior product manager, as saying.
"It is a critically important product to our users and this represents [the] most significant upgrade to Yahoo mail in five years," he added.
Other upgrades to Yahoo's service include improved spam filtering, and tools to search through mail that will help better sort and prioritise messages.
"Yahoo Mail is a critical product for the company with an enormous user base. The challenge for them is to make having a Yahoo Mail address cool," said Industry analyst Greg Sterling, of Sterling Market Intelligence.
"In the past I would have said people don't want all these functions in their e-mail box but with people now having so many sites to visit this makes sense," he said.
"I think if Yahoo Mail performs well, they will win people over."