The area, close to the club's current Stamford Bridge stadium, was earmarked as a potential new home along with a site at the derelict Battersea Power Station.
That south London landmark was sold to a Malaysian consortium last year, though, and Hammersmith and Fulham Council have now confirmed Earls Court will be used for 7,583 new homes.
A statement from the Council read: "The Earls Court landowners, H&F Council and Capco, are committed to the regeneration of the Earls Court Opportunity Area in line with the masterplan.
"It is the firm intention of the two landowners to proceed with this landmark regeneration, creating 9,500 permanent new jobs and around 36,000 temporary construction jobs.
"Neither of the two landowners believes that the inclusion of a football stadium in the scheme would offer the regeneration benefits of the existing masterplan."
Council Leader Nicholas Botterill said: "There really is no place for Chelsea within the Earls Court redevelopment and it remains the council's firm belief that the future of Chelsea is best served at their historic home."
Stamford Bridge holds fewer than 42,000, a capacity well below those at Manchester United, Arsenal, Manchester City and Newcastle.