eBay and its payments platform PayPal are due to split in the second half of 2015, with PayPal becoming its own separate company.
The decision came from eBay’s board of directors following a strategic review of the company’s future plans.
eBay CEO John Donahue said: "eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets.
"As independent companies, eBay and PayPal will enjoy added flexibility to pursue new market and partnership opportunities. And we are confident following a thorough assessment of the relationships between eBay and PayPal that operating agreements can maintain synergies going forward. Our board and management team believe that putting eBay and PayPal on independent paths in 2015 is best for each business and will create additional value for our shareholders."
In the rapidly changing global and mobile commerce and payments landscape, it is expected both companies will be able to benefit from their independence from next year.
The board concluded that the benefits of the existing relationship between eBay and PayPal would "naturally decline" over time, but can both be optimised with "arm’s length operating agreements".
The company expects to complete the transaction as a tax-free spin-off in the second half of 2015, subject to market, regulatory and certain other conditions.
PayPal’s revenues are outpacing those of eBay’s, growing at 19% a year. PayPal is expected to transact around 1bn mobile payments this year.
PayPal facilitates one in every six dollars spent online today. Total payments volume over the last 12 months increased by 26% to $203bn.
Alongside the announcement of the business separation plan, the auctioneers also appointed an ex-American Express enterprise president Dan Schulman to be the president of PayPal.
Donahoe said: "As both a leading global technology platform and a financial services business, PayPal requires a diverse blend of leadership skills and operating experience in its president and future CEO.
"Dan has a proven track record of leading complex technology businesses at scale, driving sustainable growth and understanding how to innovate to drive competitive advantage and deliver compelling experiences for customers. I am thrilled to have him lead PayPal forward as a publicly traded, independent global payments leader, and we welcome him to the team."