Roberto Di Matteo, who guided Chelsea to Champions League and FA Cup titles a few months back, was fired by the club following a 3-0 loss at Juventus.
Rafael Benitez has been named interim manager until the end of the season.
Di Matteo was hired as full-time manager in June after he led Chelsea to the European crown, following Andre Villas-Boas' sacking. But Russian billionaire and owner Roman Abramovich was very disappointed to see Chelsea on the brink of elimination from the group stage of the Champions League this year, leading to the Italian getting his marching orders.
"The team's recent performances and results have not been good enough and the owner and the board felt that a change was necessary now to keep the club moving in the right direction as we head into a vitally important part of the season," Chelsea said in a statement.
It is believed that after Di Matteo's departure, former Liverpool and Inter Milan coach Benitez had shown interest for the vacant post and Pep Guardiola, Harry Redknapp and one-time interim Chelsea manager Avram Grant were also in the race, but eventually Chelsea owners picked Benitez.
They probably found him more suitable to solve their defensive problems. The opponents have hit 21 goals against Chelsea in 10 games in all competitions. The club could not win even a single match in four league games.
It is Benitez's first coaching assignment since Inter fired him in December 2010. He is known for his defensive approach. The only concern is Abramovich's love for the attacking game -- he spent millions of dollars to bring in attacking playmakers Oscar, Eden Hazard, Marko Marin and Victor Moses.
Ever since taking control of the club, Abramovich has changed managers quite frequently. Di Matteo was the eighth coach of Chelsea, since he bought the Blues in 2003.
"Wow, Chelsea have sacked their manager!! ... its a madness," Manchester United defender Rio Ferdinand said on Twitter.
"The club faces a difficult task ahead in qualifying for the knockout stages of the UEFA Champions League as well as maintaining a strong challenge for the top of the Premier League while competing in three other cup competitions," the statement added. "Our aim is to remain as competitive as possible and challenge strongly on all fronts.
"We will never forget the huge contribution he has made to this club's history."
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