The regulator said interest and fees must not exceed 0.8% a day of the amount borrowed.
In total, no one will have to pay back more than twice what they borrowed, and there will be a £15 cap on default charges.
The restrictions, first proposed in July, will start from January.
FCA chief executive Martin Wheatley said:
“For the many people that struggle to repay their payday loans every year this is a giant leap forward. From January next year, if you borrow £100 for 30 days and pay back on time, you will not pay more than £24 in fees and charges and someone taking the same loan for 14 days will pay no more than £11.20. That’s a significant saving.
“For those who struggle with their repayments, we are ensuring that someone borrowing £100 will never pay back more than £200 in any circumstance. There have been many strong and competing views to take into account, but I am confident we have found the right balance.”