"Chelsea Football Club and Jose Mourinho have agreed to part company today by mutual consent," a statement posted on the club's Web site (www.chelseafc.com) said.
The confirmation followed media reports which had said senior players, including captain John Terry, had received text messages from their Portuguese manager informing them he was leaving.
Mourinho, who was contracted until 2010, was hired by Russian billionaire owner Roman Abramovich in 2004 with a brief to break Manchester United and Arsenal's domination of English soccer and make Chelsea the best club in Europe.
The former Porto boss made a stunning impact, winning the title in his first season, Chelsea's first since 1955, and charming the media with his sharp sense of humour.
The self-styled "special one" repeated the feat in 2006 but failed to make it a hat-trick last season when they finished second to Manchester United. Mourinho also won two League Cups and the FA Cup for Chelsea and had the remarkable distinction of never losing a home league game during his glittering reign.
However, European success eluded him and probably hastened his downfall. Chelsea twice lost to Liverpool in the Champions League semi-finals, last season on penalties.
Rumours began to surface last year that Abramovich was losing patience with Mourinho and was demanding a more attractive brand of soccer.
The signing of Ukrainian striker Andriy Shevchenko from AC Milan, a close friend of Abramovich, also appeared to cause friction between coach and owner.
Chelsea began this season poorly by their own high standards. A lacklustre 2-0 defeat at Aston Villa was followed by a dull 0-0 draw at home to Blackburn Rovers on Saturday that left them fifth in the table.
Mourinho bemoaned his luck in typical fashion.
"You cannot make an omelette without eggs," he said, referring to injured internationals Frank Lampard, Didier Drogba and Michael Ballack.
Tuesday's disappointing 1-1 Champions League draw at home to Norwegian outsiders Rosenborg Trondheim in front of just 25,000 fans proved the final act of a remarkable period in Chelsea's history, but Mourinho walks away with a tremendous record.
Of the 120 league games he took charge of, his team won 85, drew 25 and lost just 10.
(Additional reporting by Mike Collett)