Chelsea have been banned from signing any new players until January 2011.
The punishment was meted out by world governing body Fifa after the club was found guilty of inducing Gael Kakuta to break his contract with Lens in 2007.
A Fifa statement said the Blues would not be able to register new players in the next two transfer windows.
Chelsea insist they will "mount the strongest appeal possible" and say the sanctions are "totally disproportionate to the alleged offence".
A statement from the Premier League club, who will make their appeal to the Court of Arbitration for Sport (Cas), added: "We cannot comment further until we receive the full written rationale for this extraordinarily arbitrary decision."
Fifa's dispute resolution chamber (DRC) ruled French winger Kakuta, now 18, must also pay compensation of 780,000 euros (£682,000), for which Chelsea are "jointly and severally liable".
I say well done to FIFA for having the balls to stand up to a big club . One can only hope that the FIFA don't back down under intimidation and stick to their decision, changing the decision to a lesser ban would make a mockery of FIFA.
Former Chelsea player Pat Nevin thinks that could mean problems for Blues manager Carlo Ancelotti.
"He's got a number of worries going ahead," said Nevin, who played for Chelsea between 1983 and 1988.
"He's going to lose a number of players to the African Cup of Nations around January-February time.
"Then there is the World Cup coming up. After a World Cup, your players are tired, and many of the Chelsea players will be involved. They'll need to replenish their squad and, if they fail with this appeal, they won't be able to."
Lens president Gervais Martel said he felt the judgement was fair and would send out a warning message to larger clubs like Chelsea who break the rules.
"We expected this kind of decision. The player was under contract with us and they came and stole him away from us," he said.
"Chelsea didn't follow the rules. They contacted the player when he wasn't even 16 and while he had been contracted to our training group from the age of eight.
"The financial sanction isn't over the top given the nature of the infringement, but it's really quite significant when it comes to not being able to recruit players.
"It's an important message given that protecting up and coming youth players who are contracted to clubs is an issue being followed closely by UEFA president Michel Platini."