Insider sources told Bloomberg that the investment bank has been advising the firm for the past fortnight, with potential buyers believed to be circling.
AOL is rumored to have been in talks with private equity funds such as Silver Lake about mounting a potential bid for Yahoo!.
The search engine turned down an offer close to $50 billion from Microsoft in 2008, but since that date the value of the company has fallen by around 50 per cent.
This has led to speculation that a takeover bid could be mounted for the company, although no formal offer has yet been made.
AOL is believed to be in the preliminary stages of discussions with the private equity firms, with the latter groups considering whether they should raise between $10 and $12 billion to help fund a bid.
Representatives of Goldman Sachs, Yahoo! and AOL have declined to comment on the media reports at this stage.
Youssef Squali, a Jefferies & Co analyst, said: "[Yahoo! is] perhaps more valuable to a financial buyer able to unlock the value of the assets in a private setting."
He explained that this would allow tough choices to be made by the firm's management, without the need to worry about the scrutiny of the public markets.
According to inside sources, some Yahoo! investors have joined with bankers and private equity firms in promoting the idea of a takeover of the company by AOL, allowing both companies to strengthen their position in competition against rivals such as Google and Facebook.
The latest comScore report has revealed that Google increased its lead over Yahoo! in the explicit core search market last month, holding a 66.1 per cent share in comparison with Yahoo!'s 16.7 per cent.
By Asim Shah