The 520-room hotel will undergo a comprehensive renovation as part of the £80m ($126m) sale agreement.
Bedrooms and public spaces, including the Living Room, Wave restaurant, Whiskey Sky rooftop bar and the Welcome Desk will be refurbished.
The hotel’s 33rd floor Altitude event space, which has 360-degree views of the city and can accommodate 350 for a reception, is also set to be given a makeover.
There are a further 14 meeting rooms, totalling 1,115 sqm of event space.
The property is the only hotel on Lake Michigan, and is the closest hotel to Navy Pier and within walking distance of East Michigan Avenue and Chicago’s business districts.
Starwood has entered into a 40-year management agreement to continue operating the hotel under the W flag.
Starwood’s president of global development Simon Turner said: "As part of our asset light strategy, we continue to look for opportunities to sell our owned real estate at the right time to the right owners, which is in the best interest of our shareholders.
"Chesapeake has been one of our valued partners, and we are pleased to expand our relationship with them to deliver an unparalleled W experience to our guests at W Lakeshore for many years to come."