Up to 3.7 million pensioners who previously received a free TV licence will now have to pay for it.
The BBC will scrap blanket free licences for over-75s, but households with one person who receives Pension Credit will still be eligible.
The BBC said “fairness” was at the heart of the ruling, which comes into force in June 2020.
It follows a consultation with 190,000 people, of which 52% were in favour of reforming or abolishing free licences.
According to the BBC, around 900,000 households are claiming Pension Credit, which is is a non-taxable weekly top up for pensioners based on a person’s income.
The number of households which could be eligible to apply for Pension Credit could number 1.5 million by 2020.
The BBC Board said it was the “fairest option to help the poorest pensioners”.
BBC chairman David Clementi said it had been a “very difficult decision”.
“We think it’s fair to those over 75 but also to all our audiences for whom there was no appetite for the level of cuts that would have been necessary if the concession had been extended,” he added.
“There are people for whom this will be unwelcome news, who have not paid until now but will do so.
“We know we have a loyal audience over the age of 75 and we think many of them will understand the difficult position we are in.”
Analysis by David Sillito, media correspondent
Free licences were given to the over-75s as part of a Government programme to reduce pensioner poverty. Fifteen years later that Government funding was cut.
Ever since then, the BBC has been pondering if it can afford to take on the bill. It’s a cost that’s rising every year as the number of pensioners continues to grow. In 2020 it’s estimated there will be around 4.6 million households eligible for the over-75s scheme.
This then is a compromise, around a third of the cost will be born by the BBC and two thirds passed on to ‘wealthier’ pensioners. The elderly are by far the biggest consumers of the BBC’s output, the average age of BBC TV’s audience is now over 62, the question is how far younger licence fee payers should subsidise these older viewers.
As consumption of traditional TV by younger viewers continues to drop there could well be questions about why they are being expected to pay for a service that the heaviest users get for free.
Free licences were first introduced by then-Culture Secretary Chris Smith in 2000 at the same time as half-price licences for the visually impaired.
In 2015, the government announced the BBC would take over the cost of providing free licences for over-75s by 2020 as part of the fee settlement.
The cost was expected to total £745 million – a fifth of the BBC’s current budget by 2021/22.
The new scheme will cost the BBC around £250 million by 2021/22 depending on the take-up.
The BBC’s consultation was announced in November last year. Nearly half of respondents (48%) said they were in favour of continuing concessions to over 75s.
Thirty-seven percent were in favour of reforming the current rules with 15% in favour of scrapping concessions of over 75s.