Chelsea lost 1-0 at Everton to finish nine points behind Manchester United in the Premier League and the axe swiftly fell on Ancelotti to leave Chelsea looking for their seventh manager since Russian Roman Abramovich took over the club in 2003.
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More importantly for billionaire Abramovich, they fell short in the Champions League again after a quarter-final defeat by United, a loss that led to widespread speculation that Ancelotti would not see out the final season of his three-year contract.
"Chelsea Football Club can confirm that Carlo Ancelotti parted company with the club today," the club said in a statement on their website two hours after the end of the match at Everton.
"The owner and board would like to thank Carlo for his contribution and achievements since taking over as manager in July 2009, which included winning the Double for the first time in the club's history.
"However, this season's performances have fallen short of expectations and the club feels the time is right to make this change ahead of next season's preparations.
"Chelsea's long-term football objectives and ambitions remain unchanged and we will now be concentrating all our efforts on identifying a new manager."
A year ago Italian Ancelotti signed off his first Premier League season in charge with an 8-0 thrashing of Wigan Athletic to clinch the title in style. Chelsea then added the FA Cup with a 1-0 final victory over Portsmouth.
FLYING START
They made a flying start this season, winning their first five league matches and scoring 21 goals in the process.
Things started go wrong in November with defeats by Liverpool, 3-0 at home to Sunderland and Birmingham City as well as a series of draws which left United in control of the title race.
Ancelotti, on an almost weekly basis, spoke of the club going through "a difficult moment" but it proved a long-lasting one as the poor results continued into the New Year.
The arrival of Spanish striker Fernando Torres for a record 50 million pounds in January failed to transform their fortunes.
When Chelsea faced United in March they were in fifth place, 15 points behind, and though they won that game at Stamford Bridge 2-1 and got to within three points of the top, a 2-1 loss at Old Trafford this month rubber-stamped United's title.
After April's Champions League defeat Ancelotti has had the air of a dead man walking, meeting the regular enquiries about his career prospects by saying he wanted to stay but would not lose any sleep if the club decided otherwise.
Twice a Champions League winner with AC Milan and recently linked with a return to Italy with AS Roma, the 51-year-old will not be short of job offers.
Andre Villas-Boas, who on Sunday l
