The former Brighton and Hove Albion boss was given his marching orders a day after his side lost 2-0 at home to Aston Villa. He leaves with Chelsea 11th the Premier League, 12 points off the Champions League places.
In a statement, co-controlling owners Todd Boehly and Behdad Eghbali said: "We have the highest degree of respect for Graham as a coach and as a person. He has always conducted himself with professionalism and integrity and we are all disappointed in this outcome."
Chelsea host Liverpool in the Premier League on Tuesday and face Real Madrid in the first leg of their Champions League quarter-final on 12 April.
They are now on the search for their next boss – these are the current odds for the next permanent Chelsea manager, according to SkyBet.
1. Graham Potter sacked
Graham Potter Photo: Ryan Pierse
2. Julian Nagelsmann - 1/3
The former Bayern Munich and RB Leipzig boss is the clear favourite to takeover at Stamford Bridge Photo: Dean Mouhtaropoulos
3. Bruno Saltor - 9/2
The Brighton legend is the interim manager while Chelsea search for their new boss Photo: Mike Hewitt
4. Brendan Rodgers - 6/1
Brendan Rogers was sacked as Leicester City manager today. The former Liverpool boss has worked at Chelsea before. (Photo by Paul Harding/Getty Images) Photo: Paul Harding