A report from Axios values the deal at $400m (£330m), but Facebook would not confirm the final price.
In a blog post, Instagram's VP of Products Vishal Shah said third party firms would still have access to Giphy's library of GIFs and stickers.
But many of those sites including Twitter and Pintrest are direct competitors to Facebook.
A Graphical Interchange Format or GIF is an animated image or short soundless video that plays on a continuous loop without requiring the viewer to press play.
They are often used on social media or messaging app to convey an emotion or joke.
Mr Shah wrote Giphy's animated images made "conversations more entertaining" and said its library would be integrated into Instagram and Facebook's other platforms.
Giphy is one of the largest sites for creating these images and storing them. Its main competitor is Imgur.
Facebook said 50% of Giphy's traffic already came from its platforms and half of that was from Instagram.
The purchase comes at a time when Facebook has seen increased users due to Covid-19 lockdown orders. But, in the months preceding the global pandemic the social media giant had been facing increased scrutiny from US regulators over antitrust concerns and that it had too much control over the social media space.