"Any player who takes drugs breaches his contract with the club as well as the FA rules. The club totally supports the FA in strong action on all drugs cases."
It is understood that Mutu, a Romania international, will lose his £60,000-a-week salary, equivalent to £3million a year, with immediate effect.
The Football Association still has to rule on a possible two-year ban for the player who has been charged with failing a drugs test.
Chelsea owner Roman Abramovich is understood to have given his full support to the sacking which was carried out by Chelsea's chief executive Peter Kenyon.
A club source added: "Chelsea is actively considering all options in relation to any financial loss as a result of this case. Chelsea's decision to terminate is entirely independent of, and not affected by, any FA procedures." Mutu has confessed he is a regular user of cocaine and has been addicted to the drug since early this year.
If that is the case he is likely to have played with the drug still in his bloodstream, including his last Premiership appearance at Aston Villa on 11 September.
The striker has told friends he turned to the drug after he became depressed over his divorce from his actress wife Alexandra and the fact he was not a regular first team choice
Chelsea bosses ordered him to take a drugs test after becoming concerned over his erratic behaviour. He began suffering from mood swings and frequently missed training. Things came to a head when he was involved in a car chase with Romanian police last month after failing to stop for speeding.
On 1 October he was tested at Chelsea's training ground and the results came back positive for cocaine.
An FA source said: "This is the toughest action taken against a player over drugs. Chelsea clearly have no wish to be associated with a coke-snorting fool who dragged the club's name into the gutter.
"He had obviously gone much further than experimenting with cocaine and even admitted it may have affected him during matches."
Mutu is currently on holiday in Italy, where he used to play with Parma before joining Chelsea last year.
He had been expecting Chelsea to support him during rehabilitation, but now finds himself in the wilderness.
An FA insider said: "Now he will be lucky to get into a pub team. He had the world at his feet but his decline is a lesson to any star thinking of doing drugs."
The definition of "gross misconduct" in the standard Premiership contract covers "the use, or possession of, or the trafficking in, of a prohibited substance."
