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Lampard’s last game in charge was Sunday’s 3-1 victory over Luton Town in the FA Cup fourth round.
Considered one of the greatest players to have ever played at Stamford Bridge, he left the Blues in 2014 having won three English Premier League titles during 13 years at the club.
The 42-year-old returned as the club’s head coach in July 2019.
Lampard enjoyed a successful first season which saw the London club qualify for the UEFA Champions League and reach the FA Cup final.
The former England international was backed in the summer transfer window by owner Roman Abramovich, recruiting big-money signings including German internationals Kai Havertz and Timo Werner.
But after a strong start to the season, the club’s form has tailed off.
Lampard leaves with the club languishing ninth in the Premier League following a run of five defeats in the past eight league games.
In a statement, Abramovich said: “This was a very difficult decision for the club, not least because I have an excellent personal relationship with Frank and I have the utmost respect for him.
“He is a man of great integrity and has the highest of work ethics. However, under current circumstances we believe it is best to change managers.”
Lampard is the 12th Chelsea manager to be sacked since Russian billionaire Abramovich bought the club in 2003.
Former Paris Saint-Germain and Borussia Dortmund manager Thomas Tuchel is the favorite to replace Lampard at Stamford Bridge.
Chelsea next takes to the pitch on Wednesday with a home encounter in the Premier League against Wolverhampton Wanderers.
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