The collaboration deal will see Spotify integrated with the Yahoo online entertainment portal, which is claimed to reach around 700m unique users monthly, according to comScore data for May 2012.
Spotify will initially roll out to Yahoo music and later be "contextually integrated" globally across the rest of the Yahoo Media Network, including entertainment sites such as Yahoo Movies and omg!.
In turn, Yahoo will create an app for Spotify's growing third-party application platform, offering Yahoo original entertainment content to Spotify's 10m active users.
"At Spotify we want to light up the Web with music and as Yahoo's global music partner we're able to reach their massive audience," said Daniel Ek, the chief executive & founder of Spotify.
"We are really excited about the new Yahoo leadership team and thrilled to partner with them to build great experiences around high quality content."
Yahoo interim chief executive Ross Levinsohn added: "Delivering compelling premium experiences across screens is core to our mission at Yahoo.
"Spotify is the leader in the digital music field and together we can provide the 'soundtrack' for users around the world. What Daniel and his team are doing is changing an industry, and we're thrilled to be partnering with them."
Yahoo said that integrating Spotify will include the rollout of Spotify's new 'Play' button on Yahoo entertainment sites, enabling users to enjoy their music within the experience.
Due to launch later in the year, the Yahoo app on Spotify's platform will offer premium original content ranging from "artist profiles to musical programmes", said Yahoo.