Yahoo! ( YHOO) is taking a pass on Time Warner's ( TWX) America Online, according to published reports.

The Internet giant decided not to pursue buying a stake in AOL after finding Time Warner's proposed terms unacceptable, according to reports in The Wall Street Journal and Reuters. Earlier reports suggested that Time Warner had rebuffed Yahoo! in a bid for a part of AOL's programming arm that valued the operation at $10 billion.

The news comes just a month after Yahoo! joined the bidding for AOL in a development reported by TheStreet.com . The apparently frenzied bidding for AOL struck some observers as a surprise given the company's long-held albatross status at parent Time Warner. Meanwhile, Time Warner is locked in a battle with activist shareholder Carl Icahn and is presumably feeling pressure to act in some fashion to revitalize the once-hot unit.

Google ( GOOG), the top search engine, and Microsoft ( MSFT), the largest software company, are now seen as front-runners for part of AOL, people familiar with the situation told the Journal. The newspaper also reported that Time Warner may make a decision as early as next week about which company with which it will enter exclusive negotiations.

Any potential AOL-Microsoft partnership may face antitrust issues and a deal with Google could include cable giant Comcast ( CMCSA), the newspaper said.

Yahoo!, which is based in Mountain View, Calif., couldn't immediately be reached before the start of regular business hours. Time Warner spokesman Edward Adler declined to comment.