Facebook has agreed to suspend the Tag Suggest feature in Europe.Photo: AFP
Ireland's Data Protection Commissioner (DPC), Billy Hawkes, who launched the probe because Facebook's European operations are based in Ireland, said he was happy that the site had agreed to remove the tool in Europe by October 15.
New users are already unable to access it.
Hawkes said: "I am satisfied that the review has demonstrated a clear and ongoing commitment on the part of FB-I to comply with its data protection responsibilities."
He added: "By doing so it is sending a clear signal of its wish to demonstrate its commitment to best practice in data protection compliance."
Facebook said in a statement: "In light of discussions with our regulator in Ireland, we have agreed to suspend the Tag Suggest feature in Europe."
It said it would work with the Irish authorities "on the appropriate way to obtain user consent for this kind of technology under European rules".
Facebook was keen to encourage members to "tag" their friends in photographs because it ensures they are shared more widely, but it has been a controversial addition to the site.
Europe-versus-Facebook, an Austrian campaign group that has been fighting for clearer privacy policies on Facebook and already took its complaints to the DPC last year, welcomed Friday's ruling.
This was "a very surprising decision of the Irish authority" and it "sounds like a big victory for users," the group said on its website.
"It looks like we might soon be able to drop our first complaint," it added.