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Chelsea will pay adidas an undisclosed sum to terminate their ?300million kit sponsorship deal six years early and take up a new deal with a rival sportswear giant.
The deposed Premier League champions and the German sportswear manufacturer on Wednesday announced that the decision to end their 10-year partnership in June 2017, after an 11th year, was mutual.
Chelsea announced a 10-year deal worth ?30million annually in June 2013, trumpeted as "the biggest deal to date".
But Manchester United subsequently signed a ?75million-per-year deal and Real Madrid agreed a ?1billion, 10-year deal - both with adidas - dwarfing the sum received by Chelsea.
The sportswear giant says the club have a new kit deal lined up with one of its competitors.
A statement from adidas read: "Chelsea Football Club and adidas AG announced today that they have mutually agreed to terminate their existing partnership agreement prematurely.
"The agreement will now end on June 30, 2017 and not, as originally agreed, on June 30, 2023.
"This mutual agreement on early termination of the agreement will allow Chelsea Football Club to enter a new equipment agreement with a competitor of adidas.
"As compensation for the early termination of the contract, the adidas group will receive a payment from Chelsea Football Club in 2017 that will already positively impact the group's net income this year."
A Chelsea statement read: "Chelsea Football Club can confirm we have mutually agreed with adidas to end our long-standing partnership at the end of the 2016-17 season."
The relationship began in 2006 and Chelsea have since lifted the Champions League, Europa League, two Premier League titles, four FA Cups and two League Cups.
But the Blues can finish ninth at best - and as low as 13th - this season, in a miserable defence of the Premier League title they won 12 months ago.
Chelsea face Leicester, their successors as champions, in the final game of the season on Sunday.
Adidas will continue to sponsor Chelsea for the 2016-17 season and last week revealed its new strip for the Blues.
Adidas says it is streamlining its sponsorship activities and there was no suggestion the decision was related to Chelsea's on-field performances this season.
"The decision will allow us to continue to implement our strategic business plan where we will sponsor fewer teams in the coming years," adidas said.
Chelsea managing director Christian Purslow will be largely responsible for finding a new sponsor.
Purslow negotiated a five-year, ?40million-per-season shirt sponsorship deal with Yokohama, the Japanese tyre manufacturer, which started this season.
And he will be expected to achieve a deal of significantly greater value than Chelsea's current one with adidas.
It is a time of transition for Chelsea, with Antonio Conte arriving as head coach once Italy's involvement in this summer's European Championship comes to an end.
Conte is the permanent successor to Jose Mourinho, who was sacked in December for the second time and replaced on an interim basis by Guus Hiddink. The Dutchman's second caretaker spell ends after the Leicester game.
There is also the prospect that John Terry could leave, ending an 18-year association with the Chelsea first team.
Chelsea's hierarchy are still to declare publicly whether the 35-year-old defender will stay or go after 703 appearances since his debut in October 1998.
Terry is out of contract at the end of this season and in January said he would not be extending his stay.
Chelsea insisted an offer may be forthcoming, but there has been no news on his future and he is suspended for the final two games of the season after his dismissal at Sunderland last Sunday.