Yahoo is reportedly set to invest millions of dollars in Snapchat's next funding round, giving the startup a $10 billion (£6.2 billion) valuation.
It has been claimed that Snapchat rejected a takeover offer from Facebook in the region of $3 billion (£1.8 billion) last year.
According to the Wall Street Journal, Yahoo will invest $20 million (£12.5 million) in the app, which allows users to send images that disappear after a few seconds. The web giant recently made an approximate $8 billion profit by selling the 40 per cent stake it held in the Chinese e-commerce firm Alibaba.
If the Snapchat funding goes ahead, it will be the latest in a long line of investments and acquisitions undertaken by Yahoo CEO Marissa Meyer.
Since joining in 2012, Mayer has spearheaded more than twenty deals aimed at transitioning the company into more of a content provider.
Last week, the firm announced the purchase of mobile-chat app MessageMe, while last year, the firm bought micro-blogging platform Tumblr in a high-profile $1 billion (£635 million) deal.
Snapchat was created in 2011 by a group of students from Stanford University and has now grown into one of the most popular mobile apps. It is part of a group of similar platforms that allow users to schedule the deletion of content in advance.
Facebook launched its own app called Slingshot earlier in the year, and is now testing a similar feature on its News Feed posts.
Despite the fact that Snapchat currently has little to no revenue, its eleven-digit valuation is likely to be the result of its estimated 100 million monthly users.