The club's website revealed the dramatic move had been made "to maintain a challenge for the trophies we are still competing for".

World Cup winner Scolari had only been in the job since June 2008, when he became Chelsea's third boss in a year.

Chelsea are fourth in the Premier League but remain in the Champions League and FA Cup, with Ray Wilkins in charge until a successor is appointed.

"Luiz Felipe Scolari has been dismissed as manager of Chelsea Football Club with immediate effect," read the statement.

"The Chelsea board would like to place on record our gratitude for his time as manager."

Scolari signed a lucrative three-year deal when he joined Chelsea and the London club could face a hefty compensation pay-out to their former manager.

Scolari's spokesman Acaz Felleger said it was Chelsea owner Roman Abramovich who had run out of patience with the Brazilian coach.

"It seems that Abramovich made the decision," Felleger told Lance newspaper's website.

"Scolari was not in a comfortable situation despite having the support of the squad and Peter Kenyon."

Felleger added that Scolari had paid the price for not being given the backing to refresh the aging Chelsea squad.

"The Chelsea squad are old. Felipe tried to rejuvenate it, but unsuccessfully. He asked (the board) to sign Deco and Robinho, but they only brought Deco."

Scolari indicated he would give his version of events in the near future.

"I am thankful for the opportunity to have worked for Chelsea and in English football," Scolari said.

"It was a very valuable experience. I am sorry that my time with everyone could not last longer. I wish Chelsea luck in the three competitions they are participating in.

"I want to take the opportunity to inform that I will keep living in London. I will respond to the media soon."

Scolari's former team travel to Watford in the FA Cup fifth round on Saturday.

The tie at Vicarage Road is the start of a vital 11 days for Chelsea, with a crucial Premier League clash with third-placed Aston Villa on 21 February, followed by the visit of Juventus to Stamford Bridge in the Champions League four days later.