The Blues cannot register new signings until January 2011 after being found guilty of inducing a player to break his contract with another club.
"Chelsea are banned from registering any new players, either nationally or internationally, for the next two entire and consecutive registration periods (transfer windows)," FIFA said in a statement on Thursday.
The punishment was handed out by world football's governing body following a contractual dispute involving the transfer of reserve team player Gael Kakuta from Racing Lens in 2007.
Following a complaint from Lens, FIFA's dispute resolution chamber ruled Kakuta, now 18, had breached his contract with the French club and that Chelsea had induced him to do so.
The player was ordered to pay 780,000 euros compensation, which FIFA said Chelsea were "jointly liable" for, and he was given a four-month ban from competitive matches.
Chelsea were also ordered to pay "training compensation" of 130,000 euros to Lens.
However, the Stamford Bridge outfit have announced that they will be appealing the ruling.
"Chelsea will mount the strongest appeal possible following the decision of FIFA's Dispute Resolution Chamber over Gael Kakuta," a club statement read.
"The sanctions are without precedent to this level and totally disproportionate to the alleged offence and the financial penalty imposed.
"We cannot comment further until we receive the full written rationale for this extraordinarily arbitrary decision."
