A poor run of form, culminating in Saturday's 0-0 draw at home to Hull City has left Chelsea all but out of the title race, seven points behind leaders Manchester United.
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Scolari, who led Brazil to victory in the World Cup final in 2002 and led Portugal to the runners-up spot in Euro 2004, replaced Avram Grant as manager last year.
A statement on the club's website (www.chelseafc.com) said: "Luiz Felipe Scolari has been dismissed as manager of Chelsea Football Club today (Monday) with immediate effect.
"The Chelsea board would like to place on record our gratitude for his time as manager.
"Felipe has brought many positives to the club since he joined and we all feel a sense of sadness that our relationship has ended so soon.
"Unfortunately the results and performances of the team appeared to be deteriorating at a key time in the season."
The statement said assistant coach Ray Wilkins would take charge on a temporary basis.
In a statement released through his agent Acaz Fellegger, Scolari said he planned to give a news conference shortly. "I'm grateful for the opportunity to have worked at Chelsea and in English football," he said. "It was a very valuable experience. I'm sorry that it has not been a longer-lasting relationship. I wish Chelsea luck in the three competitions in which they are taking part."
SURPRISE DEPARTURE
Scolari became the second Premier League manager sacked on Monday following the dismissal of Tony Adams from Portsmouth, but despite growing frustration from the club's fans towards him, his departure came as a surprise.
Chelsea are fourth in the Premier League and through to the knockout stages of the Champions League with an upcoming tie against Juventus, but he has paid the price for what is now regarded at Stamford Bridge as an unsuccessful campaign.
The club's statement continued: "In order to maintain a challenge for the trophies we are still competing for we felt the only option was to make the change now. The search for a new manager has already started and we hope to have someone in place as soon as possible."
Scolari started brightly at Chelsea with six wins and two draws from his first eight league games and they led the table most weeks until the middle of November.
