Facebook is buying Instagram, an internet startup company popular for its free photo-sharing service, Mark Zuckerberg announced.
The social networking site will pay $1bn (£629m) in cash and Facebook shares to take over the app, which allows users to alter and post pictures on their smartphones and tablets.
"I'm excited to share the news that we've agreed to acquire Instagram and that their talented team will be joining Facebook," Zuckerberg wrote on his Facebook page.
"We'll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.
"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 said.
He added that this is an important milestone for Facebook because it is the first time ever it has acquired a product and company with so many users.
Zuckerberg seemed to rule out any further acquisitions. "We don't plan on doing many more of these, if any at all," he said.
Instagram, which has roughly a dozen employees, was started in San Francisco in 2010 by Stanford University graduates Kevin Systrom and Mike Kriegerand. It is a free photo-sharing app that allows users to share their pictures via Facebook, Twitter or Instagram's own social network. Instagram's Android version, released last week, immediately received millions of downloads.
Instagram CEO Kevin Systrom wrote on the blog that his team is psyched to be joining Facebook and is excited to build a better Instagram for everyone.
The Instagram deal is expected to resemble Google Inc's $1.65bn acquisition of video service YouTube in 2006. YouTube retains its own offices in San Bruno, California, and largely operates independently of Google.
The acquisition comes as Facebook prepares to hold its initial public offering in May or June, which could value the company around $100bn.