New moms at Yahoo! can take as many as 16 weeks paid leave under the new policy. Dads are eligible for eight weeks of paid leave.
New parents will also receive $500 to help with baby-related costs.
Mayer was pregnant when she took over the company last summer. She gave birth in September and came back to work just two weeks later.
The parental leave extensions come just two months after Mayer banned telecommuting at Yahoo!, setting off a debate about the merits of working from home.