Google and Comcast Corp.(CMCSA) are also mulling a joint investment in AOL.
A Yahoo spokeswoman declined to comment on "speculation or rumor." Time Warner declined comment.
Reports of the discussions with Yahoo have appeared in various media reports since the New York Post (search) first reported Microsoft's interest in AOL in September.
The Internet media network joins a crowded field of suitors, which now view AOL as the prize that could catapult the winner into the leading market position on the Internet.