In a post on the social media site, chief executive Mark Zuckerberg said branded content was "crowding out the personal moments that lead us to connect more with each other".
Mr Zuckerberg said that "video and other public content have exploded on Facebook in the past couple of years" meaning there is "more public content than posts from your friends and family".
That has shifted the balance "away from the most important thing Facebook can do - help us connect with each other".
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Mr Zuckerberg said the company had examined academic research on social media. He said it showed that when sites such as Facebook were used to connect with "people we care about", they can improve well-being.
"We can feel more connected and less lonely," he said, "and that correlates with long-term measures of happiness and health."
In contrast, "passively reading articles or watching videos - even if they're entertaining or informative - may not be as good".
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Branded content will not only be reduced - its content will be "held to the same standard" as posts from friends and family.
"It should encourage meaningful interactions between people," Mr Zuckerberg said.
There have been serious concerns about the effect social media can have on people's mental health, particularly children and teenagers.
Last week, the Children's Commissioner for England called for compulsory digital literacy to be taught in primary schools to help children cope with the pressure of getting likes, comments and views.
Researchers say children become increasingly anxious about their online image and "keeping up appearances" as they get older.
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Mr Zuckerberg said the shift in focus was likely to reduce "the time people spend on Facebook and some measures of engagement", at least initially.
But he also expects that time to be more "valuable", saying he believes the changes to be "good for our community and our business over the long term".
A Facebook vice president, John Hegeman, said advertising on the site would be unaffected.
Facebook is the largest social media network in the world, with more than two billion monthly users.