The 28-year-old, who is one of only four players to have been capped over 100 times by England, was offered a new deal by Blues but was looking for a fresh challenge and will now sign a two-year deal at Stamford Bridge.
A Birmingham statement said: "Although disappointed that we are losing our captain and such a great servant and ambassador, the club would like to offer our best wishes to Karen in her new venture."
Carney told Chelsea's official website: "I am thrilled to have signed for Chelsea Ladies
The team won the double last season to establish themselves as the top club in the country and I am excited about the prospect of helping to build on that.
"It is the right point in my career to begin a new challenge and having spoken to (Chelsea manager) Emma (Hayes) we share the same ambitions and I firmly believe this is the place to achieve those goals."
Carney started her career at Birmingham but moved to Arsenal in July 2006
She joined Chicago Red Stars, formerly of the WPS, in 2009 before returning to Birmingham ahead of the 2011 season.
Source : PA
Source: PA