Summly, founded by 17-year-old Nick D'Aloisio two years ago from his home in London, sorts news by topics in quick bites for smartphones. The start-up works closely with News Corp and is backed by Chinese investor Li Ka-Shing and angel investors including actor Ashton Kutcher and artist Yoko Ono.
Terms of the deal were not disclosed, though technology blog AllThingsD reported that Yahoo paid roughly $30 million, citing anonymous sources.
D'Aloisio said Yahoo would use the technology that powers Summly to reinvent the delivery of information such as news, weather, stocks and finance for mobile devices.
"What I am excited about with Yahoo is under the new leadership of Marissa Mayer, it's a classic Internet company that has such a big opportunity," he told Reuters.
Yahoo said it will shut down the Summly app but will integrate the company's natural language processing and machine-learning technology across Yahoo's various online services, particularly Yahoo's line-up of mobile services.
Yahoo Chief Executive Mayer is stepping up the company's efforts to build online services for the smartphones and tablets that consumers increasingly use to access the Web. Yahoo has acquired a handful of small, mobile start-ups since Mayer took over in July, though the company has yet to do any large acquisitions.
Three Summly employees will join Yahoo as part of the deal, which is expected to close in the second quarter, according to Yahoo Senior Vice President of Mobile and Emerging Products Adam Cahan. Summly founder D'Aloisio will remain in London and be Yahoo's youngest employee, Cahan told Reuters.
D'Aloisio, a pupil at King's College School, said he was unperturbed about moving from a start-up to multinational.
"I'm looking forward to it because they've built a really great environment for start-ups and founders," he said.
He said he planned to invest his multi-million pound windfall, although he added that due to his age, he "could not really touch it" yet.
Shares of Yahoo, which have surged roughly 50 per cent since Mayer became CEO, rose 19 cents to $23.45 Monday afternoon.