The 33-year-old has signed a three-year contract with the Stamford Bridge club after resigning from his post with Porto yesterday.

A statement on the Chelsea website read: "Andre was the outstanding candidate for the job. He is one of the most talented young managers in football today and has already achieved much in a relatively short space of time."

Chelsea confirmed Villas-Boas had signed a three-year deal and will take up his post "immediately".

The Blues were impressed by what their former backroom scout had achieved during his first managerial post.

"His ambition, drive and determination matches that of Chelsea and we are confident Andre's leadership of the team will result in greater successes in major domestic and European competitions.

"Andre will bring his coaching experience back to a club he is already very familiar with, having previously worked here for three years.

"He has always been highly regarded at Chelsea and everyone here looks forward to welcoming him back and working with him."

It had appeared that Guus Hiddink - who enjoyed a successful spell as caretaker boss at Chelsea in 2008-09 and continues to enjoy a close relationship with Abramovich - was set to take up a sporting director role at Stamford Bridge once his exit from the Turkish Football Federation was agreed, with compensation set at around £4million.

However, it now seems that scenario failed to get off the ground as Chelsea turned their attentions to appointing an up-and-coming coach to oversee first-team affairs following the dismissal of Ancelotti, the Italian unceremoniously axed  just 12 months after guiding the club to a league and FA Cup double.

Villas-Boas certainly fits the bill after guiding Porto to domestic and Europa League success last season. He is also no stranger to the west London club, having worked there under Jose Mourinho.

One of his first moves as the new Blues boss could be to sign Porto's star striker Falcao, the £25million-rated Colombian having impressed as the Dragons won the Europa League final at Dublin's Aviva Stadium, where the 25-year-old netted the only goal against Braga.

Villas-Boas tendered his resignation with Porto yesterday, with last night's confirmation of the receipt of the compensation payment - reported to be 15million euros - paving the way for him to move on to a new club, with Chelsea swiftly acknowledging their official interest.

All that was left was for Villas-Boas to agree the formalities of a lucrative £4.4million a year salary on his return to Stamford Bridge, but this time as the man charged with delivering the Champions League trophy.

Porto confirmed in a statement to the Portuguese Securities Market Commission, that the full buy-out clause had been met by Villas-Boas himself, although it is likely to have come via the deep pockets of Chelsea owner Roman Abramovich, who has already spent millions in cutting short contracts of previous managers and players.