FIFA have banned Chelsea from registering any new players until January 2011, meaning they will not be able to recruit any new signings for two transfer windows.
World football's governing body imposed the sanctions after investigating a complaint from Ligue 1 Lens over the transfer of Gael Kakuta in 2007.
FIFA's Dispute Resolution Chamber passed the decision on a contractual dispute between the French club and their English counterparts.
A statement from FIFA read: "The DRC found that the player had indeed breached a contract signed with the French club. Equally, the DRC deemed it to be established that the English club induced the player to such a breach
"As a result the player was condemned to pay compensation in the amount of €780,000, for which the club, Chelsea, are jointly and severally liable, and sporting sanctions were imposed on both the player and Chelsea in accordance with art. 17 par. 3 and 4 of the Regulations on the Status and Transfer of Players.
A restriction of four months on his eligibility to play in official matches has been imposed on Kakuta. Chelsea are banned from registering any new players, either nationally or internationally, for the two next entire and consecutive registration periods following the notification of the present decision.
"Furthermore, the club, Chelsea, have to pay Lens training compensation in the amount of €130,000."
In July 2005 Italian club Roma were banned from signing players for one year over the controversial signing of defender Philippe Mexes from French club Auxerre. However, the Court of Arbitration for Sport later ruled that FIFA call a halt the ban at the end of the winter transfer window.
