Users have until January 16th to delete their account to opt out of the plans.
Following its $1 billion sale to social-networking giant Facebook in April, Instagram can also now share information about its users to the site, along with its affiliates and advertisers.
Fans of the site have been quick to disapprove of the changes, with some labeling it as a "suicide note".
A statement issued by Instagram on the proposed changes state: "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."
It presents a worrying scenario for individuals who don't use Instagram, as they could soon feature in advertisements if they are caught in pictures posted by friends to the site.
The changes are the latest development in Instagram's growing relationship with Facebook and further distancing from rival social networking sites such as Twitter.
It was announced last week that the site would no longer function with micro-blogging site Twitter, where images submitted to the service would feature within their image timeline.
The move highlights Facebook's acquisition of Instagram as it looks to exclusivise its relationship, but may alienate users even further during the process.
UPDATE: Since writing, Instagram has updated its terms of service and stated it has no intention of selling its users' photos. Check the latest story here.
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