And ambitious owner Roman Abramovich, who bankrolled an audacious
£50m move for striker Fernando Torres
during the January transfer window, will now start the search for a successor capable of recapturing the Premier League from Manchester United, while also guiding the club to the much-coveted Champions League trophy.
"Chelsea's long-term football objectives and ambitions remain unchanged and we will now be concentrating all our efforts on identifying a new manager," read the club statement.
Ancelotti had reiterated his ambition to remain at Chelsea, but insisted the decision was entirely down to the club's demanding hierarchy.
"I am now on holiday - but I am not sure how long my holiday will be," he said in his post-match media conference shortly before he was sacked.
"We haven't arranged any meeting but I think in the next week, now the season is finished, the club can address my job and they will take a decision.
"I have to wait and see what happens. I don't have to say anything to the club - they can judge me on my job for two years."
Ancelotti had been coveted by Abramovich after spending eight years in charge at AC Milan, guiding the Italian giants to two Champions League titles in 2003 and 2007.
He signed a three-year contract in June 2009, taking over from interim boss Guus Hiddink, who had guided Chelsea to the FA Cup before returning to take charge of the Russia national team.
Managers since Abramovich took over Chelsea in 2003
Sept 2000-June 2004
June 2004-Sept 2007
Sept 2007-May 2008
July 2008- Feb 2009
Luiz Felipe Scolari
Feb 2009-June 2009
July 2009-May 2011
Ancelotti's first season in English football began in spectacular fashion, winning the Premier League and FA Cup - sealing the former with a thumping 8-0 victory against Wigan on the final day of the 2010 calendar.
But his second year in west London proved significantly more challenging as he was twice thwarted by Manchester United domestically and in the Champions League, where Chelsea suffered a quarter-final exit to Sir Alex Ferguson's team.
The Blues had been top of the table but the former England midfielder's departure coincided with a poor run of form, losing 3-0 to Sunderland before a 1-0 reverse against Birmingham during a six-match winless league run.
Defeats by Wolves and Liverpool followed at the start of the year before a late-season renaissance revived their title hopes.
However, a 2-1 loss to Manchester United at Old Trafford on 8 May effectively sealed Sir Alex Ferguson's 12th Premier League title.
"Last year was really good, this year was not so good," added Ancelotti.
Chelsea's attentions will now turn to finding Ancelotti's successor, their seventh manager in the eight years since Abramovich took control of the club in 2003.
Porto's highly rated Andre Villas-Boas, Hiddink and former Barcelona manager Frank Rijkaard are all in the frame.
MOTD pundits on Ancelotti sacking
Dutchman Hiddink, who has a close relationship with Abramovich, revealed he still has an advisory role at Stamford Bridge.
"Since I left two years ago I've been advising the club on things concerning the squad," he wrote in
De Telegraaf on Saturday
"Sometimes I become a sounding board. It costs me very little time and I can combine it well with my position with Turkey. There is no conflict at all."
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