After Sunday's 1-0 loss to Everton, Chelsea finished with 71 points, their worst season since Roman Abramovich bought the club in 2003.
Ancelotti won the Premier League and FA Cup titles last year in his first season in charge, but the London club failed to win a trophy this season and was knocked out of the Champions League in the quarterfinals.
"This season's performances have fallen short of expectations and the club feels the time is right to make this change ahead of next season's preparations," Chelsea said in a statement. "Chelsea's long-term football objectives and ambitions remain unchanged and we will now be concentrating all our efforts on identifying a new manager."
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