Dairy Milk, which sells 300m bars in the UK and Ireland per year, will be the first mass-market chocolate bar to go Fairtrade.
It is thought that the move will result in the tripling of sales for Fairtrade cocoa in Ghana, where Cadbury sources the majority of its beans, helping tens of thousands of farmers in the area.
Harriet Lamb, chief executive of the Fairtrade Foundation, said it hoped Cadbury's support will galvanise other confectioners to adopt the ethical production certification. She said that the confectioner had "set a new standard for the chocolate industry".
Cadbury chief executive Todd Stitzer said: "By working together, the Fairtrade Foundation and Cadbury believe we can get more people in the UK to buy Fairtrade products and achieve more for the cause than we ever could individually. This initiative is part of our ongoing commitment to cocoa farmers in Ghana."
The Fairtrade Foundation was set up to ensure that farmers in the developing world get a larger share of the money made from products that use raw ingredients they supply.
Fairtrade products are experiencing continued growth with sales increasing 47% last year to £700m. The figures indicate that many consumers are willing to spend more money on products that have ethical credentials, despite the economic downturn.
The brand's move to Fairtrade forms part of a long-term strategy called the Cadbury Cocoa Partnership, an initiative that aims to ensure the economic, social and environmental sustainability of cocoa farmers and their communities around the globe. Cadbury will invest £45m to support the cause in the next ten years.