Omidyar, who is the largest shareholder in eBay with a stake of 8.37 percent, said separating PayPal from eBay was not a new idea and the board had evaluated the option but decided to keep the businesses together.
Icahn, who disclosed a 2.15 percent stake in the e-commerce company last week, had also accused two long-time eBay board members, Marc Andreessen and Scott Cook, of having business interests that directly competed with eBay.
"Instead of having an honest discussion about a reasonable question, Mr. Icahn has chosen to attack the integrity of two highly respected and qualified board members, Scott Cook and Marc Andreessen," Omidyar said in a statement.
Venture capitalist Marc Andreessen defended the corporate-governance practices of the technology industry in an interview with the Wall Street Journal saying, "If I'm on a public board and that public company is looking at buying a company in a certain space and one of my startups is in that space, I will not be part of that conversation."
"This has been established over decades of corporate governance and there's nothing unique to tech about it," Andreessen told the Journal.