Yeoh was nominated for her starring role in Everything Everywhere All At Once, which also earned her a Golden Globes win earlier this month.
News of the Asian superstar's Oscar nod trended on social media as many Chinese moviegoers rejoiced.
She will become the first Asian woman to triumph in her category if she wins.
Yeoh is the first Malaysian and also the first woman of Chinese descent to gain an Oscar nomination for Best Actress.
This year's Academy Awards nominations have been particularly fruitful for stars of Asian descent, with Everything Everywhere All At Once earning 11 nominations.
Yeoh's co-stars Ke Huy Quan and Stephanie Hsu, as well as director Daniel Kwan, were similarly honoured.
Quan, a former child star who first gained fame through movies such as Indiana Jones And The Temple of Doom, is nominated for Best Supporting Actor.
Hsu is up for Best Supporting Actress, while Kwan is nominated for Best Director alongside co-director Daniel Scheinert.
In addition, Vietnamese-American actress Hong Chau garnered a Best Supporting Actress nomination for her role in The Whale.