Two years after the Blues paid £47.5million to sign the German striker, the club have agreed to sell him back to Leipzig after a return of 29 goals in 83 matches.
The Bundesliga side will fork out an initial £20m to sign Werner with an additional £5m in add-ons for his permanent transfer.
On Tuesday evening, the club announced the deal and stated: “The forward is heading back to the club where he enjoyed four successful years before moving to west London, departing Stamford Bridge for his homeland as a European and world champion.
“All at Chelsea thank Timo for his contribution to our success over the past two years and wish him well for his future career.”
The news comes after Werner posted an emotional farewell to Chelsea fans having completed his Leipzig medical.
He wrote: “I am incredibly grateful for the time I spent at this special club. At this point I would like to express my appreciation for my teammate, the coaches and staff, and especially for you, the special supporters.
“I felt so much love and support throughout the last two years and I will never forget how you guys stood behind me in good and in challenging times!
“We lifted trophies like the Champions League together and I will always remember the song you wrote and chanted for me.
“I’m already looking forward to hopefully playing at Stamford Bridge again one day!”