NEW YORK — AOL, under shareholder pressure to make strategic changes as revenue declines, agreed to sell and license patents to Microsoft in a deal worth $1.06 billion. AOL shares soared the most in more than two years.

The Internet company will sell more than 800 patents and related patent applications to Microsoft and grant the software maker a nonexclusive license to its retained patent portfolio, the companies said Monday. AOL will hold more than 300 patents and patent applications after the deal.

The transaction lets New York-based AOL generate additional funds amid slow advertising growth and a decline in its dial-up Internet subscribers. The company, whose revenue has dropped 29 percent since its spinoff from Time Warner in late 2009, has faced pressure from shareholder Starboard Value to consider moves including a patent deal.

“Few people were anticipating that they were going to generate 1 billion-plus dollars of cash,” said Tom Forte, an analyst at Telsey Advisory Group. “The company has done an incredible job of creating value from their patent portfolio.”

AOL said it plans to return a “significant portion” of the sale proceeds to shareholders. Had the patent deal closed already last year, AOL said it would have had about $15 per share of cash on hand as of Dec. 31. The company ended last year with $407.5 million in cash and equivalents, down 49 percent from 2010.

Starboard, which started pushing for change last year, had said AOL’s patent portfolio could yield more than $1 billion. Patent-advisory firm M-Cam Inc. estimated that AOL’s patent portfolio would be valued at about $290 million in a sale. Jeffrey Smith, Starboard’s co-founder and chief executive officer, declined to comment.

“The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long- term shareholder value,” AOL CEO Tim Armstrong said.

Under terms of the deal, Microsoft will have to pay AOL a fee of $211.2 million if it chooses to end the transaction. The deal is expected to be completed by the end of 2012, upon receiving regulatory approvals.

AOL has struggled to revive revenue growth after separating from Time Warner, as the company competes for advertising dollars with Google and Facebook. AOL’s sales declined in each quarter last year and revenue this year is estimated to drop 3.7 percent to $2.1 billion, according to analysts’ projections compiled by Bloomberg.