Guus Hiddink and Avram Grant have been linked with the Brazilian’s job.
Scolari only took charge of Chelsea in the summer.
A statement on the club’s official website read: “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.
“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.
“While that continues assistant coach Ray Wilkins will take charge of the team on a temporary basis.”