Roman Abramovich fired Roberto Di Matteo this morning after an 'unacceptable' run of results.
The Chelsea owner, furious with the club's disastrous Champions League campaign, sacked him this morning just hours after their 3-0 defeat at Juventus.
Chelsea executives met at Stamford Bridge to tell Di Matteo that his reign was over just six months after leading them to glory in the European Cup.
Abramovich's No 1 target is former Barcelona boss Pep Guardiola, but the Blues owner needs to persuade him to end his year-long sabbatical from football. If he fails in this bid, he will turn to Rafa Benitez to take the helm.
Guardiola is spending time in Manhattan with his family after four years in charge at the Nou Camp and is the Russian's top target to take over.
Sources close to the 41-year-old say it will take a 'phenomenal' offer for the manager to change his mind.
However, it is understood Guardiola's advisers are willing to begin negotiations with prospective employers ahead of next season.
Discreet enquires from Chelsea, City and Milan have already taken place, with all three clubs keen to steal a march on their rivals in the race to land the talented manager.
Benitez is understood to be willing to take the job until the end of the season. This is despite turning down a similar offer last season after Andre Villas-Boas was sacked.
The former Liverpool and Inter Milan boss is addressing a conference in Abu Dhabi today and is scheduled to fly back into London tomorrow.
Abramovich was furious that the team, who started the season with the chance to win seven trophies, are already in freefall.
Although he was prepared to overlook the Community Shield defeat against Manchester City, he was furious with the 4-1 defeat against Atletico Madrid in the Super Cup.
Abramovich’s circle made it clear that they had to play seven games to 'qualify' for the Community shield and that it should be treated seriously.
Likewise the 4-1 defeat against Atletico in Monaco came after they won the Champions League final against Bayern Munich and they wanted to win it.
Chelsea need a miracle to qualify from Group E of the Champions League and are in danger of becoming the first holders in the history of the competition to go out in the group phase.
A Chelsea spokesman said: ‘Chelsea Football Club has parted company this morning with manager Roberto Di Matteo.
‘The team's recent performances and results have not been good enough and the owner and the Board felt that a change was necessary now to keep the club moving in the right direction as we head into a vitally important part of the season.
'The club faces a difficult task ahead in qualifying for the knockout stages of the UEFA Champions League as well as maintaining a strong challenge for the top of the Premier League while competing in three other cup competitions. Our aim is to remain as competitive as possible and challenge strongly on all fronts.
'The owner and the Board would like to thank Roberto for all he has done for the club since taking over in March. Roberto helped guide us to an historic Champions League victory and a seventh FA Cup.
'We will never forget the huge contribution he has made to this club's history and he will always be welcome at Stamford Bridge.
'The club will be making an announcement shortly regarding a new first team manager.'