A club statement said the self-styled "Special One" had left by "mutual consent".
He is reported to have sent text messages to players John Terry, Frank Lampard and Didier Drogba wishing them "good luck in the rest of your career".
There had been speculation over his future as manager following a string of lacklustre performances, which has left the club fifth in the Barclays Premiership.
He told them he was leaving the club today.
It follows the Blues' disappointing Champions League draw at home to Norwegian minnows Rosenborg on Tuesday.
Former Israel coach Avram Grant, recruited in the summer as director of football, is expected to take charge of the side for Sunday's league clash with Manchester United.
Chelsea FC confirmed in a short statement on its website: "Chelsea Football Club and Jose Mourinho have agreed to part company by mutual consent."
Sky Sports presenter Jon Desborough described it as "sensational news".
He added: "I think he's been edged out because Roman Abramovich (Chelsea's owner) and Peter Kenyon (Chelsea's chief executive) want to make a difference with their Chelsea team."
The 44-year-old manager is said to have been frustrated for some time with the perceived interference of Abramovich in team affairs.
Mourinho was unhappy with the £30m arrival of striker Andrei Shevchenko, a close friend of the Russian owner.
Abramovich walked out early from Chelsea's 2-0 defeat at Aston Villa earlier this season, and he will not have enjoyed Tuesday's poor result.
Mourinho refused to blame his strikers after Rosenborg held Chelsea's £100m squad to a 1-1 draw.
But the Portuguese coach was clearly frustrated and alarmed by his team's failure to score more than one goal against the Norwegians even though they created a hatful of opportunities.
Mourinho declared after the match: "Of course I am alarmed. I am not happy. We cannot score goals.
"I am disappointed, but the history of the game was simple, we had 20 chances and scored one goal. So maybe we need 40 chances to score two - and 60 to score three."
Mourinho won every domestic honour since his arrival in England in the summer of 2004 but the Champions League eluded him.
Here's some pictures of Jose's time with JT & Lamps