Facebook is paying $1 billion in cash and stock for the takeover.
Instagram was only launched in October 2010 – initially just for the iPhone before being offered as an Android app last week.
Facebook’s CEO Mark Zuckerberg has pledged to continue to develop Instagram as a separate brand, allowing it to post to rival networks.
The app is free and allows users to apply 17 filters to the pictures they take – changing the color balance to give the images a different feel – before they are uploaded.
It has proven hugely popular. The company says that it has more than 30 million users uploading more than 5 million new pictures every day.
It was reported that Instagram has 13 employees, meaning that at $77 million a head makes it the most expensive business deal in history.
Mark Zuckerberg wrote on his Facebook page: “We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience.
“We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook.”
He added: “This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all.”
Instagram’s FAQ says it had previously raised $7.5 million in funding from three venture capital firms and “a small group of angel investors”.
The deal marks the second time in four months that Facebook has taken on staff from another social network.
In December, it announced it was hiring the co-founders of the location-based check-in service Gowalla. The network closed down shortly afterwards.
The moves come ahead of Facebook’s planned flotation later this year. The firm reportedly plans to issue $5 billion worth of stock on the New York-based Nasdaq exchange in May or June. The deal could value the firm as being worth as much as $100 billion.
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