Google in June announced plans to develop spy-proof email. The addition of Yahoo is notable because the two have access to so many email users and Yahoo shed new details on the project. Google counts 425 million unique Gmail users, Yahoo 110 million.

Microsoft, which offers the free Web email service Outlook.com, has previously said it is working to incorporate encryption technologies into the service formerly known as Hotmail. Microsoft says there are more than 400 million active accounts in Hotmail and Outlook.com. Yahoo and Google say the encryption tool will be an optional feature that users will have to turn on. Engineers at the technology firms—bitter competitors in many fields—frequently talk to each other about the project, people at both companies say.

The tool will rely on a version of PGP encryption, a long-tested way of scrambling data that hasn't yet been cracked. Unlike traditional webmail services that rely on tech companies holding passwords and usernames for consumer accounts, PGP relies on users having their own encryption key stored on laptops, tablets and smartphones.

Mr. Soghoian said Yahoo and Google are taking early steps toward making the technology easier for normal consumers. Executives at both companies expect few users to adopt the technology immediately. Yahoo has altered its email process so users adopting encryption type messages in a separate window, preventing even Yahoo from reading the messages as they are typed. Mr. Stamos said his team is testing ways to get encryption keys on mobile devices. Yahoo also has to explain to users how PGP works and that it isn't a panacea for privacy concerns. For instance, it only encrypts the content of messages—not the data on who sends and receives the messages or the subject line.