Teams could be relegated or expelled from competitions for serious incidents of racism after tough new powers were voted in by Fifa.
First or minor offences will result in either a warning, fine or order for a match to be played behind closed doors.
Serious or repeat offences can now be punished by a points deduction, expulsion or relegation.
Jeffrey Webb, head of Fifa's anti-racism task force, said the decision was "a defining moment".
He added: "Our football family is fully aware that what is reported in the media is actually less than 1% of the incidents that happen around the world.
"We've got to take action so that when we look to the next 20 or 50 years this will be the defining time that we took action against racism and discrimination."
Fifa, world football's governing body, passed the anti-racism resolution with a 99% majority at its congress in Mauritius.
Richard Conway, reporting for BBC Sport at the congress, said a concern was raised over those who voted against the tougher racism measures.
"Former South African apartheid prisoner Tokyo Sexwale, now a Fifa member, urged congress to check cameras to see who voted against racism rules," he said.
"Sexwale says (the) 1% vote against demonstrates how football still has to fight against racism."
Webb said of the vote against the measures: "I would like to think it was a mistake but I'm glad it wasn't the other way. I'm glad only 1% went that way."
Nonetheless, Fifa president Blatter accepted more must be done to eradicate racism.
He said: "We need zero tolerance and strict punishments everywhere. We must lead. We must set a tough, uncompromising example.
"We can make a difference. We can send a strong signal to the racists that their time is up."
Fifa commissioned a task force to address the issue of racism after a friendly game between AC Milan and Pro Patria was abandoned due to racist chanting.
Their verdict includes putting an official inside the stadium to identify potential acts of racism and ease the pressure on the match referee.
The new rulings standardise punishment across the members, meaning federations will lose the power to impose their own judgements.
Further to the regulations that relate to clubs or international teams, the new measures will see any individual who commits a racist offence banned from stadiums for a minimum of five matches.
The five-match suspension is one that has been introduced by the Football Association, whose chairman David Bernstein sat on the task force in Mauritius.
Also on the task force was Kevin-Prince Boateng, the AC Milan player who led the walk-off in the game against Pro Patria in January.
Former England international striker Luther Blissett, an ambassador for anti-racism charity Show Racism The Red Card, admitted to reservations about the new measures.
"You've got to applaud them for doing something about it, my thing is when they talk about the 'level' of racism," he told Radio 5 live. "To me, racism is racism.
"Fifa have to let it be known where they are going to start this from. Any form of racism is serious enough for the bans to start, they should hit people hard straight away."