Former manager Jose Mourinho left Stamford Bridge because his relationship with Chelsea had broken down and the effects could be seen in their results, the Premier League club said on Thursday.
Mourinho, who stunned English football with his departure earlier in the day, was also hailed for his contribution to Chelsea in an open letter to fans issued by the club.
"It is only right we explain the reasons behind Jose Mourinho leaving Chelsea and also recognise the immense contribution he has made to the club and to English football," read the letter.
"Early this morning we announced Chelsea and Jose Mourinho had agreed to part company by mutual consent. The key phrase here is there was mutual agreement. Jose did not resign and he was not sacked.
"What is clear, though, is we had all reached a point where the relationship between the club and Jose had broken down. This was despite genuine attempts over several months by all parties to resolve certain differences.
"The reason the decision has been taken is we believed the breakdown started to impact on the performance of the team and recent results supported this view.
"We did not want this to continue or affect the club further."
Chelsea have drawn two and lost one of their six domestic league games this season and were held to a disappointing 1-1 draw at home by Rosenborg Trondheim of Norway in their Champions League opener on Tuesday.
The Londoners won two Premier League titles, two League Cups and one FA Cup in Mourinho's three-year spell in charge.
Chelsea said the first-team coaching appointment of Avram Grant, Chelsea's director of football, and the retaining of assistant manager Steve Clarke is aimed at "continuing to achieve" the club's long-term objectives.
Chelsea were also at pains to recognise what their Portuguese former manager had done for a club who had not won the league for 50 years before his first season in 2004-05.
"He has been the most successful manager the club has known and he rightly deserves that place in our history.
"Jose has been instrumental in putting Chelsea where it is today, among the leading clubs in European and world football. He will always be welcome at Stamford Bridge, whether as the guest of Chelsea or as the manager of another club, and he will be given the reception and respect his position in our history deserves."
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