AFC Bournemouth must make an initial payment of £425,000 to Blackburn for Connor Mahoney.
The Cherries brought the winger in from Blackburn last July when his contract with the Rovers expired.
However, the clubs failed to reach an agreement over the transfer fee so the Professional Football Compensation Committee (PFCC) have made the decision.
The Premier League released the following statement on the matter:
"AFC Bournemouth must pay Blackburn Rovers an initial compensation fee of £425,000.
"In addition to the initial payment, AFC Bournemouth are to pay a further sum of £100,000 on the player making 10, 20, 30, 40 and 50 first team appearances - a potential further payment of £500,000."
Additionally, Bournemouth will pay an extra £20m to Blackburn if Mahoney makes a senior England cap and 20 percent of any profit should they sell the player in the future.