However, the club will be permitted to continue to operate and have been given a special license to allow fixtures to be fulfilled and staff to be paid.
Only season-ticket holders look set to be permitted to attend matches at Stamford Bridge for the foreseeable future, with no further ticket sales allowed.
“The licence will be kept under constant review and we will work closely with the football authorities,” the Government said.
Chelsea are away to Norwich in the Premier League at Carrow Road on Thursday night.
“Our priority is to hold those who have enabled the Putin regime to account,” Secretary of State for Culture, Media and Sport Nadine Dorries wrote on Twitter.
“Today’s sanctions obviously have a direct impact on Chelsea and its fans. We have been working hard to ensure the club & the national game are not unnecessarily harmed by these important sanctions.
“To ensure the club can continue to compete and operate we are issuing a special licence that will allow fixtures to be fulfilled, staff to be paid and existing ticket holders to attend matches while, crucially, depriving Abramovich of benefiting from his ownership of the club.
“I know this brings some uncertainty, but the Government will work with the league and clubs to keep football being played while ensuring sanctions hit those intended. Football clubs are cultural assets and the bedrock of our communities. We’re committed to protecting them.”
More to follow