Instagram co-founder Kevin Systrom made the announcement at Facebook's Menlo Park campus on Thursday morning.
Vine, which launched in January, has 13 million users. Instagram has 100 million users, up from 20 million when the social networking giant bought the company more than a year ago.
Instagram will now let users shoot and share 15-second clips. And just like the photo-sharing app, you can also apply filters to the videos to add contrast, make them black and white or different hues.
If users like it, Facebook's move could propel mobile video sharing into the mainstream. Mobile video is a growing market for advertisers and young people are flocking to this technology.
"What we realized very early on was the filters we had for photos were great for photos, they really make your photos look beautiful," Systrom said. "But we needed something new for video. We wanted to evolve so we partnered with an artist who specializes in video filters and we created 13 brand new, gorgeous filters to turn your video into something beautiful."
The app will record as long as your finger is on the red button or for 15 seconds, whichever comes first. Not unlike Vine, taking your finger off the button will stop the recording, allowing you to shoot the scene from a different angle or record something else altogether. Once you have 15 seconds of footage, you can play it from the beginning and post it on Instagram to share with others.
Given Vine's popularity, "it is perhaps more surprising that Facebook has not introduced video for Instagram sooner. There is no doubt Twitter will move quickly to up the ante on Vine and this could undercut Facebook's efforts with video on Instagram," said Eden Zoller, principal consumer analyst at Ovum, a technology research firm.
A new feature called Cinema was also introduced. Basically it's a video stabilizer for your phone, which means no more shaky video.
Normally an app like this would initially launch on just one device. But at the event they told us it will be available for all Android devices as well.
(The Associated Press contributed to this report)