The Brazilian, who took charge last summer, couldn’t sustain his magnificent start with the Blues, leaving the Champions League finalists fourth in the league.
"Luiz Felipe Scolari has been dismissed as manager of Chelsea Football Club today (Monday) with immediate effect," a statement on Chelsea's official site read.
"The Chelsea board would like to place on record our gratitude for his time as manager."
Chelsea's goalless home draw with Hull City last Saturday is believed to be the straw that broke the camel's back for impatient owner Roman Abramovich.
Scolari, 61, is widely regarded as one of the most successful coaches on the international stage, having achieved some remarkable feats with Brazil and Portugal previously.
However, the 2002 World Cup winner failed to live up to his reputation in the Premiership, as he almost lost every game against close league rivals in his short Stamford Bridge stint.
Chelsea are yet to reveal candidates for the vacant position.