Villas-Boas only took charge at Stamford Bridge last summer following the departure of Carlo Ancelotti, but has endured a difficult time at the helm.
A 1-0 defeat at West Bromwich Albion on Saturday proved to be the final straw for owner Roman Abramovich and Roberto Di Matteo has now been placed in charge until the end of the season.
A club statement read: "Andre Villas-Boas has parted company with Chelsea Football Club today.
"The board would like to record our gratitude for his work and express our disappointment that the relationship has ended so early.
"Unfortunately the results and performances of the team have not been good enough and were showing no signs of improving at a key time in the season.
"The club is still competing in the latter stages of the UEFA Champions League and the FA Cup, as well as challenging for a top-four spot in the Premier League, and we aim to remain as competitive as possible on all fronts.
"With that in mind we felt our only option was to make a change at this time.
"With immediate effect Roberto Di Matteo has been appointed first-team coach on an interim basis until the end of the season."
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