Neither side was commenting on the speculation, but Microsoft's shares also took a jump as analysts saying the companies' current search-related tie-up made a Microsoft buyout logical.
"Yahoo! has a leadership problem and Microsoft has invested a ton of money in insuring its success," said independent Silicon Valley analyst Rob Enderle.
"If Yahoo! goes under or is bought by a competitor, it is a loss for Microsoft," he continued.
Yahoo!'s shares jumped 10.1 per cent to $15.92 on the nest, while those of Microsoft, which has struggled to build an Internet presence as powerful as Google, closed up 2.17 per cent to $25.89.
The talk of a new bid came three and a half years after Microsoft was publicly humiliated when Yahoo! co-founder Jerry Yang rejected a generous bid for the company at $31 a share, giving it a $44.6 billion valuation.
When Microsoft raised the offer to $33 a share, a valuation of more than $47 billion, Yang still said it was too little.
At the time a frustrated Microsoft chief Steve Ballmer emphatically said he was through with Yahoo! acquisition talks.
Meanwhile many Yahoo! shareholders blasted the company for spurning Microsoft, contributing to Yang's decision to step aside as chief executive.
A year later though, Microsoft signed a deal for its search engine Bing to handle queries at Yahoo!, helping it to gain ground on rival Google.
But the company has still failed to capitalize on its huge Web presence, and while Google's stock has soared, Yahoo!'s has sunk, hitting $11.09 on August 8, one month before the board ousted chief executive Carol Bartz in a rift over its direction.
Bartz in turn blasted the board for its own shortcomings.
But a memo sent to Yahoo! employees last month said the company was fielding inquiries from "multiple parties" interested in the business.
One is believed to be Jack Ma, the head of Chinese online retail powerhouse Alibaba, who was visiting California this week and reportedly expressed buying the Sunnyvale, California, company.
Alibaba is 43 per cent owned by Yahoo! and is considered one of its best assets, but the relationship between the two was strained earlier this year in a dispute over Alibaba's online payments platform Alipay.
Enderle said Microsoft would not likely let Yahoo! slide into someone else's hands.
"Being led to the altar and jilted last time was incredibly embarrassing, but they will protect their investments," Enderle said of Microsoft.
"Microsoft is likely to throw money at Yahoo! if it is at risk, but investors will not take this lightly," he added.