Di Matteo's time as manager at Stamford Bridge was always on the edge after poor results in the Premier League while Chelsea are on course to become the first holders in the history of Champions League to be elminated in the group stages.
A statement on the Blues official website said: Chelsea Football Club can confirm Rafael Benitez has been appointed interim first-team manager until the end of the season.
"The owner and the board believe that in Benitez we have a manager with significant experience at the highest level of football, who can come in and immediately help deliver our objectives.
"The 52-year-old Spaniard is due to meet the players at the training ground in Cobham tomorrow."
Benitez takes over the Bridge until the end of the season after being out of work for nearly two years. The Spaniard was sacked by Inter Milan only six months at the San Siro.
Prior to his dismal career at Inter, the 52-year old spent six years at Anfield with Liverpool, where he helped the Reds beat Chelsea on several meetings, including the Champions League semi-finals in 2005 and 2007.
Meanwhile, Chelsea fans were upset about brining in Benitez as a replacement for Di Matteo, due to the Spaniard's time at Liverpool.
The former Liverpool manager, who lifted the Champions League with the Reds in 2005, will take charge of his first match against Manchester City and coincidentally will lead Chelsea to the Club World Cup in December, a competition which he won with Inter Milan.