Italian Di Matteo has limited top flight coaching experience, although he did land the Chelsea job after leading the side to Champions League success in 2012 as a caretaker manager but was fired after eight months when their form dipped.
The 44-year-old former Italy international had two other managerial stints in England, coaching West Bromwich Albion and lower-division side Milton Keynes Dons.
"Schalke part ways with Keller, Roberto Di Matteo takes over," the club said on Twitter.
Schalke have been struggling domestically this season and have recorded just two wins in 10 competitive games.
Despite crashing out of the German Cup to a third-tier club in the first round, Schalke have enjoyed a relatively good start in the Champions League, drawing 1-1 at Chelsea before matching that result against Maribor in their second group game.
In the Bundesliga, however, Schalke are languishing in 11th place on seven points after recording just two wins, forcing bosses to act.
Keller, who narrowly escaped the axe several times before, had been in charge at Schalke since December 2012. 

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