The former Italy manager had a year remaining on his current contract and had already taken charge of pre-season preparations at the club's Cobham training ground outside London.
"Chelsea Football Club and Antonio Conte have parted company," Chelsea said on their website.
"We wish Antonio every success in his future career."
The 48-year-old's departure comes after Napoli president Aurelio De Laurentiis said on Wednesday that Chelsea were close to securing a deal for the Italian club's former boss Maurizio Sarri.
Sarri, 59, led Napoli to two second-place and one third-place finish in three seasons in charge. He was replaced by former Chelsea boss Carlo Ancelotti in May with the Naples club seeking to end Juventus' dominance in the league.
Conte's relationship with Chelsea's hierarchy was strained after disagreements over their transfer policy last season.
His future has looked uncertain with Chelsea failing to qualify for the coming season's Champions League after finishing fifth. The team will now play in the Europa League.
Chelsea take on Huddersfield Town in their opening fixture of the new Premier league campaign on Aug. 11.
(Reporting by Aditi Prakash in Bengaluru; Editing by Kevin Liffey and Christian Radnedge)
