Chelsea's relationship with Nike will reach the pitch from the 2017-18 season on, with Nike producing strips for the first team, academy and ladies teams, as well as replica kits and clothing for fans.
Chelsea director Marina Granovskaia said:
"We believe Nike will be able to support our growth into new markets as well as helping us maintain our place among the world's elite football clubs."
The deal makes them the Premier League's second best performers for new commercial deals over the past two years – Man United, again, were the one team surpassing the £1bn they have secured.
Brian Barry, commercial director and correspondent with punditarena.com, told Breakfast Business:
"It's hyperinflation of football, isn't it? We've seen transfer deals just skyrocket over the last years. What used to buy you a £50 million player, now you'll have to spend £100m. But the revenue of these clubs is actually rising in line with it.
"It all comes down, at the end of the day, to the amount of fans a club has," Barry said of Man United reigning supreme commercially. "The more fans you have, the more kits you're going to sell, the more lucrative to the supplier. So they're going to pay more essentially. It's a fascinating space. Chelsea are now one of the biggest clubs in the world and their appeal shows that, with a company like Nike coming on board and willing to pay so much."
Asked whether the market would be shocked by the size of the deal, considering Chelsea are currently out of European competition, Barry said:
"Chelsea, with Roman Abramovich, are spending so much, it's quite low-risk. They're not expected to be down for long. They finished 10th in the Premier League last year, but these clubs tend to spend their way out of trouble.
"We've seen Man United as well – I keep harping back to them, but they are the go-to when it comes to these big deals – [be] out of the Champions League for a year, [and they've] dropped out of it for another year now. But they've bought these big, big players like Paul Pogba and Zlatan Ibrahimovic who are guaranteed to get them back into these competitions sooner rather than later.
"And they're the ones selling the shirts. For instance, in the first week alone of Ibrahimovic being at United, they had sold £76m worth of jerseys all over the world."