The practice of investment companies buying a stake in the economic rights of players is common in European and South American football, although it is already forbidden in the Premier League in England.
However, football's global governing body has now decided to prohibit TPO following a meeting of FIFA's executive committee in Zurich on Friday.
The decision allows for a transitional period and comes following significant pressure from European football's governing body UEFA to introduce new rules surrounding TPO.
UEFA general secretary Gianni Infantino indicated earlier this year that they would take action if FIFA failed to heed their calls for new TPO regulations.
A working group will now be set up to enforce the ban, which could have huge consequences on domestic leagues where TPO is used on a regular basis to allow clubs to buy players with the assistance of outside investors.
FIFA general secretary Jerome Valcke stated that there is no timescale for the ban to implemented, however, he does not expect it to come into effect for three to four years.
