The 47-year-old won just 12 of his 31 games in charge of the Blues, with a 2-0 defeat at home against Aston Villa on Saturday proving the final failure for Potter with Chelsea.
The former Brighton boss lasted just shy of seven months at Stamford Bridge having signed a five-year deal when he arrived from the Seagulls in September.
The Mirror report that the remainder of that deal with the Blues is worth around £50m, but the club has reached an agreement to avoid paying Potter that huge amount.
According to The Guardian the pay-off will be similar to the £13m that Chelsea handed Thomas Tuchel when they fired him earlier in the season.
It has been an extremely expensive season for the Blues when it comes to managers as they also paid Brighton a release clause of around £20m to secure his services in September.
That takes the total of dismissing Tuchel, hiring and then firing Potter to close to £50m, with the club now sitting 11th in the Premier League table, 12 points off the Champions League places.
Recently axed Bayern Munich manager Julian Nagelsmann is the favourite to take over from Potter in west London, a long way ahead of other contenders such as Mauricio Pochettino and Luis Enrique with the bookmakers.
However, Nagelsmann is reportedly not keen to take the job before the end of the season and would much prefer to come in over the summer, leaving Chelsea in limbo for now.
Coach Bruno Saltor is in temporary charge, with Chelsea hosting Liverpool in the Premier League on Tuesday night.
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