A brief statement on the Blues' official website, read: "Chelsea Football Club and José Mourinho have agreed to part company today (Thursday) by mutual consent."
Mourinho is reported to have text messaged five senior players this evening to tell them that he is leaving the Blues, who could only draw at home with Rosenborg in their opening Champions League tie on Tuesday.
The set-back followed disappointing results in the Premiership against both Aston Villa and Blackburn, results that had left Mourinho visably on edge.
The Portuguese coach was said to have fallen out with owner Roman Abramovich last season, although the dispute was believed to be behind the pair. However, poor form plus difficulties with star names Andriy Shevchenko and Michael Ballack appear to have put further strain on their relationship.
The 'Special One' still had three years left on a contract, worth a staggering £6.5m a year, but Abramovich is believed to be prepared pay a huge slice of that in order to end their relationship.
Mourinho arrived at Chelsea having won the Champions League with Porto in 2004 and he continued his success with back-to-back Premiership titles. However, last season Manchester United beat the Blues to the league crown, although they did manage to lift both domestic cups.
Reports have immediately linked Sevilla boss Juande Ramos with the job and ironically the Spaniard is already in London having seen his side lose 3-0 to Arsenal in their Champions League encounter this evening.
It seems more than likely that current Russia coach Guus Hiddink will also be considered among the frontrunners for the job.
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The news comes just 24 hours after the disappointing Champions League draw against Rosenborg.
BBC Radio 5live football correspondent Jonathan Legard understands Mourinho texted senior players, including skipper John Terry, with the news.
Mourinho joined Chelsea in the summer of 2004 and led them to the Premiership title in each of his first two seasons.
His achievements also saw him voted as Premiership manager of the year in 2005 and 2006.
However the Champions League trophy eluded the club and this season's campaign started with Tuesday's shock 1-1 result against the Norwegians in front of a crowd of just 24,973.
It was their third successive game without a win following a 2-0 defeat at Aston Villa and a goalless draw with Blackburn in the Premier League.
Those results have left Chelsea fifth in the table - two points behind leaders Arsenal and with a visit to Manchester United to come on Sunday.
He did have one unique record during his reign in never losing a home league game at Stamford Bridge.
I'll probably make a brake today. There is nothing special to pay attention to, some Germany 2, France 2 and other standard Friday offer minus Holland 2. Not much interesting for me, I must say. If you have something interesting to share with everyone, you know how to do that, thought, I doubt there will be such hero. :) If I change my mind, and I decide to make a slip, I'll post an update, that will be at around 7 PM. Good luck!
Just think how much less interesting the Premiership would be without Jose.
1 'Please don't call me arrogant, but I'm European champion and I think I'm a special one.'
The quote that started it all, uttered not long after Mourinho had arrived at Chelsea, in 2004.
2 'If I wanted to have an easy job… I would have stayed at Porto… beautiful blue chair, the Uefa Champions League trophy, God, and after God, me.'
Only God is more special than Jose and don't you forget it.
3 'We have top players and, sorry if I'm arrogant, we have a top manager.'
Don't apologise for being arrogant Jose. It never stopped you before.
4 'The best team lost. After they scored only one team played, the other one just defended for the whole game.'
Jose is not a happy bunny when Liverpool knock Chelsea out of the Champions League semi final in 2005.
5 'I want to give my congratulations to them because they won. But we were the best team. We didn't lose the game.'
After Chelsea lost to Charlton in the 2005 Carling Cup. You see a 'best team lost' theme here?
6 'My history as a manager cannot be compared with Frank Rijkaard's history. He has zero trophies and I have a lot of them…'
I bet Mourinho's dad is harder than Rijkaard's dad too.
7 'We are on top at the moment but not because of the club's financial power. We are in contention for a lot of trophies because of my hard work.'
Yes, but the multi-millions sure help.
8 'The crowd is magnificent, singing "F**k off Mourinho!" and so on…'
Only Jose is arrogant enough to be flattered by abuse from the terraces.
9 'Who were (Frank) Lampard, (John) Terry and (Didier) Drogba two years ago? They were certainly not world stars. And in this moment who are they?'
Well done, you have indeed turned shit into gold.
10 'Barcelona have a great club. But in 200 years of history they have won the European Cup only once. I have been managing for a few years and I have already won the same amount.'
Well, he had a point - until Barca went on to win the Champions League in 2006.
