The new policy means that Instagram can license all photos to companies or any other organisation, including for advertising purposes, essentially making it the world's largest stock photo agency. For example, a hotel could pay Facebook to use photos taken at its resorts for its brochures and its website, without paying or even notifying the Instagram user who took the photo.
"We may share your information as well as information from tools like cookies, log files, and device identifiers and location data with organisations that help us provide the service to you... (and) third-party advertising partners," said a notice on the Instagram site.
The move has been widely condemned by users, with one New York photographer calling it "Instagram's suicide note".
"Good bye #instagram. Your new terms of service are totally stupid and nonsense. Good luck playing with the big boys," tweeted one user.
Relations with social media giant Twitter have also soured, after Instagram recently disabled its Twitter card support – meaning Instagram photos no longer displayed correctly on the site.