The Spaniard took over from Pep Guardiola last summer, but the club revealed in December that he was unwell with parotid gland cancer for a second time .
He returned to management in late March after Jordi Roura took control.
Barca president Sandro Rosell and director of the football Andoni Zubizarreta addressed the media and the playing squad on Friday evening to confirm the news.
"After evaluating routine tests on Tito Vilanova, he is to undergo a process of treatment incompatible with being Barca coach," Rosell said.
He added: "This is a big blow for Barcelona, but Barca have received many blows and have always overcome them."
Rosell confirmed a new manager would be announced early next week.
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