A statement on the club’s official website read: "The team's recent performances and results have not been good enough," following a 3-0 defeat to Juventus.
The Italian leaves the club having secured a European Cup and FA Cup double last season and with Chelsea third in the Premier League table, four points behind leaders Manchester City who they face on Sunday at Stamford Bridge.
Goal.com gives a comprehensive recap of the many twists and turns of Di Matteo's short spell in charge at Stamford Bridge.
Di Matteo initially took charge of Chelsea in March after the club parted company with Andre Villas-Boas following a series of poor results.
A defeat to West Brom saw the Portuguese's time at the club come to a premature end with Di Matteo promoted from assistant to interim first-team coach until the end of the season.
The Italian began life at Stamford Bridge in fine style. A 2-0 win over Birmingham City in an FA Cup fifth-round replay was followed by a Premier League victory over Stoke and a stirring Champions League victory over Napoli as the Blues returned to form with a vengeance.
It was to get even better for Di Matteo and Chelsea in April. Having secured a spot in the FA Cup semi-finals, the Blues thrashed Tottenham 5-1 at Wembley to book their place in the final and a meeting with Liverpool.
Just three days after that win, the Blues took on Barcelona at Stamford Bridge in the first leg of the Champions League semi-final with a solitary Didier Drogba strike providing the west Londoners with a precious lead to take to Camp Nou.
The second leg in Spain was, unsurprisingly - given the recent history between the two sides - a tumultuous affair. First-half goals from Sergio Busquets and Andres Iniesta bookmarked a red card for John Terry and Chelsea looked to be heading out of the tournament.
However, a spectacular chip from Ramires brought his team back into the game before a 90th-minute equaliser from Fernando Torres sent the Blues into a final against Bayern Munich, in Munich.
The momentum gained from victory over Barcelona continued as Chelsea tasted glory on two fronts in May. The Blues were favourites to beat Liverpool at Wembley and so it proved as goals from Ramires and Didier Drogba gave them a two-goal lead.
A second-half Andy Carroll strike offered the Reds hope, but Chelsea survived the fightback with Di Matteo picking up the same trophy as manager that he had won twice as a player during his time at Stamford Bridge.
There was more success on the way for the Italian. A little over a week after the FA Cup final, the Blues headed to Munich to take on Bayern on their own ground in the final of the Champions League.
Yet another dramatic game ensued as Bayern scored with less than 10 minutes remaining through Thomas Muller and looked set to be crowned European champions.
Chelsea had other ideas, however, and an 88th-minute equaliser from Didier Drogba brought extra-time and eventually penalties with the Ivorian converting the decisive spot-kick, in his last match for the club, as Di Matteo brought the European Cup to Chelsea for the first time in their history.
After the success of the previous season, the new campaign did not get off to the best start. Premier League champions Manchester City came from behind at Villa Park in the Community Shield to beat Chelsea 3-2, with the Blues finishing the game with 10 men after Branislav Ivanovic was sent off for a foul on Aleksandar Kolarov.
Whilst the Blues did win all their Premier League games in August - beating Wigan, Reading and Newcastle - there was further disappointment in the European Super Cup.
A Radamel Falcao-inspired Atletico Madrid thrashed Chelsea 4-1 - with the Colombian netting a hat-trick and later, as revealed by Goal.com, leading the club to open talks with the striker over a move to Stamford Bridge.
The Blues struggled initially to shake off their Super Cup hangover and started September sluggishly, dropping their first Premier League points of the season against QPR to reduce their early lead at the top of the table to just one point before letting a two-goal lead slip against Juventus in the Champions League.
However, a battling display against Stoke City and an 85th-minute winner from Ashley Cole earned Chelsea a narrow 1-0 win to remain as the division’s pace-setters.
Di Matteo fielded a strong side in the Capital One Cup third-round tie at home to Wolves, and quickly reaped the rewards as the likes of Gary Cahill, Juan Mata and Fernando Torres all scored in a routine 6-0 rout.
However, the month’s most impressive display was left to last as Chelsea made the short trip over to inconsistent Arsenal.
The game saw John Terry feature having been fined and handed a ban after the Football Association found him guilty of racially abusing Anton Ferdinand, while Juan Mata hit the winner as the Blues won 2-1 in a scoreline which flattered the home side.
Following the impressive 2-1 win away at Emirates Stadium over Arsenal, Chelsea were three points clear at the top of the Premier League with a record of five wins and one draw from their opening six league games of the season.
Wins over Norwich and Tottenham in the Premier League continued their fine start, along with European victories over Nordsjaelland.
However, defeat at Shakhtar was followed by Manchester United's 3-2 win at Stamford Bridge in a controversial game. Chelsea had Ivanovic and Torres sent off as the Red Devils won a league game in west London for the first time in over a decade.
The ramifications of that loss continue to rumble on, however, with the club alleging referee Mark Clattenburg using inappropriate language towards John Obi Mikel, with the Football Association forced to investigate.
And so to November and the final days of Di Matteo's reign. A 3-2 victory over Shakhtar Donetsk was the Italian's sole victory in the month with disappointing draws against Swansea and Liverpool sowing seeds of discontent.
A defeat at West Brom last time out was not the way Di Matteo would have wanted his side to prepare for their trip to Turin and so it proved with the Blues beaten 3-0 defeat in Juventus.
That loss made it two defeats out of two, left the club's Champions League hopes hanging by a thread, and most importantly proved to be the final straw for Abramovich.
With Di Matteo now gone, the early favourites to replace the Italian are Rafael Benitez and Harry Redknapp as, for now, the saga continues.