"Although we are just at the beginning of this process, we have reached an exciting milestone," Microsoft chief executive Steve Ballmer said Thursday.

"I believe that together, Microsoft and Yahoo! will promote more choice, better value and greater innovation."

The companies said they will now turn their attention to implementing the deal.

Justice Department officials concluded "that the proposed transaction is not likely to substantially lessen competition in the United States, and therefore is not likely to harm" Internet users or advertisers.

"The competitive focus of both Microsoft and Yahoo! is predominately on Google and not on each other," the agency said in a statement.

The European Commission earlier announced it had approved the deal between the US technology titan and the pioneering California Internet firm.

Under terms of the agreement announced in late July 2009, Microsoft's new Bing search engine will handle online queries at Yahoo! properties, with the California Web pioneer customizing presentation of results and ads.

The transition will involve moving Yahoo!'s search platforms to Microsoft, with Yahoo! running sales relations with both companies' premium search advertisers globally.

"This breakthrough search alliance means Yahoo! can focus even more on our own innovative search experience," said Yahoo! chief executive Carol Bartz, who took command of the firm after a failed takeover bid by Microsoft.

"Yahoo! gets to do what we do best: combine our science and technology with compelling content to build personally relevant online experiences for our users and customers."

All global customers and partners are expected to be transitioned by early 2012.

"Once the transition is completed, the companies' unified search marketplace will deliver improved innovation for consumers, better volume and efficiency for advertisers and better monetization opportunities for Web publishers through a platform that contains a larger pool of search queries," the firms said in a joint statement.

Yahoo! and Microsoft announced in December that they had finalized the details of an Internet search and advertising partnership -- a year after Microsoft offered 47.5 billion dollars in a takeover bid for Yahoo!.

Google opposed a Microsoft takeover of Yahoo! and had proposed its own alliance with the struggling Internet firm, but backed off from the plan after it was frowned upon by US regulators.

Predictably, Microsoft had weighed in against a Google partnership with Yahoo! at the time.

Analysts are divided on how much closer the Microsoft-Yahoo! tie-up will take either company to Google, the overwhelming leader in a Web search and advertising market that research firm Forrester estimates will be worth more than 30 billion dollars in 2014 in the United States alone.

"The deal combines the second and third player into one so you have a bigger Number Two," said analyst Rob Enderle of Enderle Group in Silicon Valley.

"What helps them most is that Google appears very distracted at the moment. Google is all over the place."

Since the start of the year, Google has rolled out a Nexus One mobile telephone and Buzz social networking at its free email service, and taken on the Chinese government over Internet censorship in that country.

If Google follows through on a threat to shut down its China search engine, that would mean less competition for Microsoft in a market ruled by local online query service Baidu.

Microsoft and Yahoo! said that they continue to work with regulators in South Korea, Taiwan and Japan, whose approval is needed for the deal to be launched in those countries.

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