Last month the social network was found to breach Canadian law by holding on to users’ personal data indefinitely.
Facebook has now agreed to make changes to the way it handles this information and be more transparent about what data it collects and why.
It will also make it clear that users can deactivate or delete their account.
“These changes mean that the privacy of 200 million Facebook users in Canada and around the world will be far better protected,” said Canadian privacy commissioner Jennifer Stoddart.
“We’re very pleased Facebook has been responsive to our recommendations.”
The decision could also have implications for other social networking websites, she said.
Elliot Schrage, vice president of global communications and public policy at Facebook, said he believed the new policies set “a new standard for the industry”.
There are around 950,000 developers in 180 countries who provide applications for the site.
Specifically, the changes will require applications to state which information they wish to access and obtain consent from the user before it is used or shared.
“Application developers have had virtually unrestricted access to Facebook users’ personal information,” said Ms Stoddart.
“The changes Facebook plans to introduce will allow users to control the types of personal information that applications can access.”
The site will also encourage users to review their privacy settings and make it clear to users that they can delete or deactivate an account, and what the difference is between the two.
Facebook’s Michael Richter said if a user chose to deactivate their account, the site would still store their information “even if it is for 10 years”.
“We’re committing to that user,” he said. “We want them to know that if they change their mind they can always come back.”
The social network has said work on the changes will begin immediately but they would take around 12 months to implement.
The regulator first started its investigation as a result of complaints by the Canadian Internet Policy and Public Interest Clinic (CIPPIC) at the University of Ottawa.
The country is the first to complete a full investigation of Facebook’s privacy practices.
Canada has around 12 million Facebook users, more than one in three of the population.