West Ham have appointed former Chelsea assistant manager Steve Clarke as the number two to new boss Gianfranco Zola.
The two clubs were believed to have disagreed over compensation for the ex-Scotland defender, but have since been able to compromise in order to let Clarke leave Stamford Bridge.
Clarke tendered his resignation to the Blues hierarchy last Friday, which was initially rejected, as he sought to join Zola at Upton Park.
Chelsea demanded substantial compensation, reported to be as much as £5million, but the London clubs are now thought to have settled on a lower figure.
West Ham chief executive Scott Duxbury said: ''We are very pleased to welcome Steve Clarke to the club.
''Steve is rightly regarded as one of the top coaches in Europe and his experience and knowledge will be a huge asset to us.
''He recognises what we are trying to achieve at West Ham United and wants to be a part of that.
''We have worked very hard to bring him on board and are confident we now have the perfect coaching team.''
Clarke spent 11 years as a player at Stamford Bridge from 1987 and returned to the club as a youth team coach following a short spell as Newcastle's assistant manager.
He was promoted to become Jose Mourinho's assistant manager following the Portuguese's arrival in 2004 and went on to work under both Avram Grant and current Blues boss Luiz Felipe Scolari.
Clarke has agreed a three-year contract and will work alongside fellow first-team coach Kevin Keen and goalkeeping coach Ludek Miklosko.
Zola's revamp of the Hammers backroom staff has also seen Antonio Pintus, another ex-Chelsea employee who has worked with Juventus, brought in as fitness coach.
Chelsea later confirmed that a compensation deal had been agreed with West Ham and insisted the precise details would remain confidential.
''The club would like to take this opportunity to thank Steve for his many years of loyal service to the club, and wish him the very best in his new position at West Ham,'' a statement on the Blues' website read.
''His departure ends an association with the club that began over 21 years ago and apart from a short spell as a coach at Newcastle, has been continuous.''
The statement added: ''Steve Clarke will forever be a true Chelsea legend.''