The Premier League club have also been fined more than £460,000, while the FA face a £390,000 sanction.
Chelsea have been given 90 days to rectify the situation concerning the players signed.
The club were found guilty of 29 incidences of breaching article 19, which relates to the transfer of players aged under 18.
Sources understand the punishments are a result of a three-year FIFA investigation related to the signing of more than a dozen players by Chelsea.
One of the main contentious signings was that of Bertrand Traore in 2013. Chelsea also twice breached regulations relating to third-party influence, article 18bis, FIFA said.
Chelsea will be able to sell players, but not register any new signings.
“This ban applies to the club as a whole – with the exception of the women’s and futsal teams – and does not prevent the release of players,” FIFA said in a statement.