Alibaba received $1 billion in funding from eight international banks including Barclays Bank, Citi, Credit Suisse, Deutsche Bank and Morgan Stanley and another $1 billion from China Development Bank.
The Chinese company had raised the remaining funds through an issue of preferred shares, bank loans and the sale of a stake to existing shareholders such as Singapore state investor Temasek Holdings Pvt Ltd and DST Global.
Alibaba Group has the right to buy back Yahoo's remaining stake after an initial public offering. Yahoo had a 40 percent stake in Alibaba Group until Tuesday's transaction.
Alibaba said it paid Yahoo about $6.3 billion in cash and $800 million in preferred shares in Alibaba Group and made a one-time cash payment of $550 million in connection with an amendment to their intellectual property license agreement.
Alibaba, which reached an agreement with Yahoo in May to buy back its shares, took its business-to-business e-commerce platform Alibaba.com private for $3 billion in June.
"The completion of this transaction begins a new chapter in our relationship with Yahoo," Alibaba CEO Jack Ma said.
Yahoo originally acquired its stake in Alibaba Group in 2005 in exchange for $1 billion and the sale of its Yahoo China business to Alibaba Group.