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.bbc.co.uk
Chelsea manager Jose Mourinho has sensationally left Stamford Bridge by mutual consent, the club has confirmed.
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.