Under the deal, Palm handhelds will come preinstalled with wireless versions of Yahoo email and instant-messaging applications.
It is the first time Yahoo has bundled its web-based services with handheld computers, the portal giant said.
The deal means that Palm users will be able to send, receive and delete email from their Yahoo accounts.
Palm's latest handheld computers include a colour version of the Palm III, the Palm IIIc, and a new operating system, Palm OS3.5. The units come with 8MB of memory, upgradeable flash-ROM memory, an infrared port, and a rechargeable lithium battery.
Palm Computing stock soared to more than $US165 per share in its first day of trading on the Nasdaq Stock Exchange earlier this month.
Since the listing, Palm has been capitalised at more than $US32 billion, considerably more than the value of its parent company, 3Com, capitalised at $US23.85 billion.
Palm Computing closed on the Nasdaq at $US51.56 yesterday.