Facebook bid one billion dollars for Instagramin April, and was given the green light for the deal from US regulators at the end of August.
But after the sharp fall in Facebook stocks, the cash plus share offer ended up being worth nearer 700 million dollars.
The social networking site's shares launched at 38 dollar each, but closed on Thursday at 19 dollars.
According to the BBC, Facebook offered 300 million dollars in cash and 23 million of its shares.
Instagram founder Kevin Systrom announced the deal on his Facebook page.
"Very excited to announce that we're now officially joining the Facebook family," Systrom wrote.
"I'm psyched for the next chapter of this long journey," he added.