The London club handed over first-team duties to assistant manager Roberto Di Matteo for the remainder of a season that is in danger of becoming the worst since Roman Abramovich bought Chelsea in 2003.
Speculation over the future of Villas Boas, at 34 the youngest manager in the league this season, had been swirling in the British media for weeks after a series of poor results and reports of rifts with senior players.
The dismissal of the man often referred to simply by his initials "AVB" came after Saturday's 1-0 league loss to West Bromwich Albion, their seventh league defeat of the season and a dreadful performance all round.
"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 London club said in a statement on their website.
The Stamford Bridge outfit have won three of their last 12 Premier League games and are in danger of missing out on qualifying for the Champions League for the first time since Russian billionaire Abramovich bought the club.
They are trailing 3-1 in their round-of-16 Champions League tie against Napoli ahead of the March 14 second leg, while they sit fifth in the Premier League table with 46 points from 27 games.
"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," the statement said.
"With that in mind we felt our only option was to make a change at this time."
While former Chelsea midfielder Di Matteo has been put in charge in the interim, the departure of Villas-Boas will do nothing to quieten fans' calls for Jose Mourinho to make a return to the club he led to back-to-back Premier League titles.
The self-anointed "Special One," currently manager of La Liga leaders Real Madrid, has featured in British newspapers in recent days, with photographs showing him in London and reportedly looking for a new house.
Mourinho told reporters on Saturday that he would be visiting London again on Monday but declined to give any details, saying: "I don't have to explain my private life to anyone."
Villas-Boas had said this week that Mourinho's shadow hung over the club, while his relationship with players from his compatriot's golden era has also been under scrutiny.
Vice-captain Frank Lampard said last month that his relationship with Villas-Boas had "not been ideal" but the Portuguese had dismissed any notion of unrest saying the only reason for an unhappy dressing room was their league position.
Major cracks, however, appeared this week when Villas-Boas said in an interview with Portugal's TSF radio that he was unsure if he still had the backing of Abramovich.
As if predicting what might be around the corner, he pointed to the owner's notorious lack of patience with managers who did not deliver silverware and in particular the coveted Champions League trophy.
"The pattern of behaviour of the owner has led to a downfall [of coaches] in similar situations or even 'better' situations," he said.
"What will be the reaction? It will be one of the two, a continuation of the project and full support or just the cultural pattern that has happened before."
He now has his answer as the seventh manager of the Abramovich era has been shown the door, following men such as Carlo Ancelotti and Luis Felipe Scolari who did not deliver what was required.
Villas-Boas was appointed on June 22, 2011, on a three-year deal and Chelsea had to pay 13.3 million pounds to trigger an escape c
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