The resignation of David Jones chairman Peter Mason could keep chief executive Paul Zahra in his job and pave the way for merger negotiations with rival Myer.
Mason and fellow director Leigh Clapham will leave the company within three months, in the wake of investor outrage at controversial share trading.
Another board member, Steve Vamos, has opted to resign immediately.
Analysts have welcomed the departures and say the move could save the job of chief executive Paul Zahra, who has previously announced he will step down once a replacement is found.
Shareholders would prefer Zahra stay in the role, especially given how long it was taking to find a successor, IG market analyst Evan Lucas said.
"He was certainly doing a reasonable job when he was there and I think the market would be happy to see him stay," he said.
Options Xpress market analyst Ben Le Brun said the board resignations could put a possible merger with Myer back on the table.
David Jones last year rejected a merger proposal from Myer, saying it did not represent fair value to shareholders.
"Perhaps these changes overnight might just get both parties back to the negotiating table," he said.
But any merger proposal would still face regulatory hurdles, Le Brun said.
A merger also wouldn't remove the underlying difficulties faced by both Myer and David Jones, as they cope with competition from online and international retailers.
The resignations of the directors follows investor outrage over the purchase of more than 32,000 David Jones shares by Vamos and Clapham in October 2013.
The purchases, which were approved by Mason, were made the day after the company received Myer's merger proposal, and days before a better-than-expected sales report.
"It is a positive that they are falling on their swords and doing the right thing for the company," Lucas said.
"It is good from an operational and board management perspective because they (the directors) have obviously been divisive figures in the company." David Jones board member Jane Harvey has been promoted to deputy chairwoman in the wake of the resignations and will lead the search for three new non-executive directors.
The company's shares were up one cent at A$3.12 ($3.38) on Tuesday.
Myer shares closed five cents lower at A$2.56.