Yahoo will provide more information on its websites that show how personal data of users are used to target advertising.
The Financial Times reported that Yahoo will add its "Ad Choices" icon to advertisements at pages such as Yahoo Mail and Messenger where users log in.
Users can get more information about the advertisement such as who placed the ad, the reason why it is featured and how to manage it using preferences.
The service was launched in the US a year ago.
This move is the first by a large online company as new European online privacy rules are set to be in place in few months.
Yahoo said that the move is aimed to improve the understanding of its ad target system and to give more controls to users than is available now.
Yahoo international privacy director Justin Weiss said, "The idea of a visual symbol in and around every ad we show is to remind users that their information is being used and to give them a portal, a pathway into what data is being used and the controls they have over them."
There is a growing concern in Europe and the US about how personal data about consumers are collected, sold and used. Regulators have proposed several measures in recent months to strengthen the position of the user.
Earlier this month, the UK information commissioner Christopher Graham had asked online businesses to prepare for the 25 May deadline when the European Union’s Privacy and Electronic Communications Directive comes into force.
The directive will place restrictions on the installation of cookies.
Moreover, EU justice chief Viviane Reding is to propose changes in existing laws in the coming months to enforce more safeguards on the use of personal information. It is believed that most of the changes would target sites such as Facebook and Google.
"Any company operating in the EU market or any online product that is targeted at EU consumers must comply with EU rules," said Reding.
Reding is likely to force companies to allow users to withdraw any data held by the websites and also make them more transparent about the data collected and the reason why they were collected.
She had added that there should be a "right to be forgotten" for Internet users.
Yahoo’s Ad Choices icon is also being tested in other European countries as well.
