The deal will provide classified business listings from the 120,000 businesses who advertise in The Phone Book from BT on the search engine.
Yahoo! Local will also allow advertisers using the Yahoo! Search Marketing network to target customers interested in a specific local area and present offers and business details to them.
The service will feature two sponsored search results at the top and the bottom of the search results page.
Stephen Taylor, regional vice-president and managing director of search and search marketing at Yahoo! Europe, said: "This joint initiative will deliver a number of important benefits for consumers looking for local products and services and businesses who advertise within The Phone Book's Classified Directory and online with Yahoo! Search Marketing. In essence, Yahoo! Local will provide people with a much more powerful way of finding local information quickly."
Bruce Abercromby, general manager for online services at BT Directories, said: "We are constantly striving to find new ways to generate new business leads for our customers through emerging technologies and through interactive agreements such as this."
Yahoo! Local has also announced plans to harness local community knowledge by including user-generated content and additional content and features from the Yahoo! network and third parties.
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