It said instead that users had incorrectly interpreted its revised terms of serviced, which it blamed on its 'confusing' choice of language.
"To be clear: it is not our intention to sell your photos," the firm said.
According to the BBC, Instagram chief executive Kevin Systrom said in a blog post that it is the firm's 'mistake that this language is confusing.'
"We are working on updated language in the terms to make sure this is clear," he said.
According to the report, compulsory changes to Instagram's terms of service are due to come into effect on January 16.
The originally proposed new wording that caused the controversy included, 'You hereby grant to Instagram a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to use the content that you post on or through the service.'
The terms also stated that 'a business or other entity may pay us to display your username, likeness, photos, and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you.'