Real Madrid has waved off the 17 million pounds compensation and cleared Jose Mourinho to join Chelsea for free.
Mourinho and Madrid had been disputing over the clause in the contract for months which still has two years to run.
According to a report by Mirror, Real President Florentino Perez said that the club has decided to end the relationship with Mourinho by the end of this season.
The president thanked Mourinho for his immense hard work and wished him all the best.
He also said that the club has no pre-contact signed with any managerial candidate for which they will be working upon in the coming days.
Freeing Mourinho from the compensation would make him return to 'home' with Chelsea.
Mourinho added: "Next season will be my 10th at the club. Hopefully it will be my best ever", the report said.
