In order to lock a user into their home directory you need to look atvsftpd's chroot functionality. You need to edit the /etc/vsftpd/vsftpd.conf configuration file and change the hroot_list_enable option to "Yes." You then specify a file called /etc/vsftpd.chroot and add all the users you wish to chroot to this file. Or, if you wish, add all users to be chroot'ed then you can set the chroot_local_user option to "Yes." Chrooting an FTP server can be complicated and have some serious security implications. I recommend you read the vsftpd.conf man page carefully.
This was first published in March 2006