The Stamford Bridge club said it had been a “very difficult decision” to part ways with the 42-year-old, who is the club’s record goal-scorer.
“We are grateful to Frank for what he has achieved in his time as head coach of the club,” Chelsea said in a statement.
“However, recent results and performances have not met the club’s expectations, leaving the club mid-table without any clear path to sustained improvement.”
The club’s Russian owner Roman 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.”
Former Paris Saint-Germain boss Thomas Tuchel, who was abruptly sacked by the French champions in December, is in line to take over, reports said.
They have lost five of their past eight Premier League matches after a good start to the season.
Lampard signed a three-year deal in 2019 and despite a transfer ban, led them to the FA Cup final and a fourth-place finish in his first managerial campaign at Stamford Bridge.
But a huge outlay of around £220 million ($300 million) on new players including Ben Chilwell and German attackers Kai Havertz and Timo Werner has failed to translate into improved results.
Lampard’s points-per-game average of 1.67 is the fourth-lowest of any permanent Chelsea manager in the Premier League.
Tuchel only became available a month ago when he left PSG, less than five months after taking them to the Champions League final, which they lost to Bayern Munich.
The 47-year-old German won back-to-back league titles with PSG, but that was not enough to satisfy the club’s Qatari owners, who replaced him with former Tottenham manager Mauricio Pochettino.
Prior to PSG, Tuchel impressed at Borussia Dortmund, having started his managerial career with Augsburg and then Mainz.