The Russian-Israeli billionaire’s planned sale of the club will now be stalled, but could still go through provided the Government issues a licence.
For Downing Street to back a sale, Abramovich would have to prove he would not benefit from the sale to meet conditions of any potential licence.
The 55-year-old has pledged to donate all funds from a Chelsea sale into a new foundation to benefit victims of Russia’s war in Ukraine.
And should the Blues owner be able to prove his plans to Government officials, the sale of the Stamford Bridge club could yet go ahead.
Roman Abramovich sanctioned
UK Government
Chelsea will be subject to a transfer ban and be blocked from negotiating new contracts with current players, after all of Abramovich’s UK assets were frozen.
Defenders Cesar Azpilicueta, Antonio Rudiger and Andreas Christensen are all out of contract at the end of the season, leaving the senior trio in a state of short-term limbo.
Culture Secretary Nadine Dorries said: “Our priority is to hold those who have enabled the Putin regime to account.
“Today’s sanctions obviously have a direct impact on Chelsea and its fans. We have been working hard to ensure the club and 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.”
Chelsea have won 21 trophies in 19 years under Abramovich's stewardship.
But that era has been brought to a halt as Vladimir Putin and Russia’s war in Ukraine rumbles on.
Chelsea cannot sell any new tickets to supporters, but all tickets sold before March 10 will be honoured.
Season ticket holders can still attend matches unaffected, while refreshments can still be served at Stamford Bridge.
Chelsea matches can still be broadcast, while only existing club merchandise can be sold.
British billionaire Nick Candy was the latest high-profile business magnate to throw their hat into the ring for Chelsea’s sale, amid a host of suitors for the Champions League holders.
Swiss tycoon Hansjorg Wyss and American investor Todd Boehly were also in the running, with more than 10 credible parties understood to have been compiling bids.