The Sunnyvale, California-based company dubbed this latest update the "All New Yahoo! Messenger".
"It really is a very dramatic step forward" both in terms of technology and the appearance of the site, said Lisa Mann, Yahoo's senior director for messaging products.
New features include animated "audibles" that say hello or flirt and "avatars" that represent users and can be customized with different hairstyles, clothes or ethnicities.
The service also makes it easier to play games with friends and share photos, music lists and information obtained from Web searches, among other things.
Yahoo Messenger ranks No. 2 behind AOL's instant messaging services, but ahead of a rival offering from Microsoft Corp.'s MSN Internet unit.