The 1906 Jewish Encyclopedia answers that the division of the several treatises into chapters as well as the sequence of these chapters was the work of Rabbi [Yehuda HaNasi] himself although some changes were made over time. See there for full references.
The division of the several treatises into chapters as well as the sequence of these chapters was the work of Rabbi himself (Letter of Sherira Gaon, l.c. p. 13). The portion discussed each day constituted an independent pereḳ; and this term was, therefore, applied elsewhere to a single discourse also. Generally speaking, the original division and sequence of the chapters have been preserved, as appears from various passages of the Talmud (R. H. 31b; Suk. 22b; Yeb. 9a; Ket. 15a; Niddah 68b; Zeb. 15a).
The names of the chapters taken from the initial letters are likewise old, and some of them are mentioned even in the Talmud (B. M. 35b;35a; Niddah 48a). In the course of time, however, various changes were made in the division, sequence, and names of the chapters; thus, for example, the division of Tamid into seven chapters is not the original one. On other variations in sequence see Frankel, l.c. pp. 264-265, and on the changes in the names see Berliner in "Ha-Misderonah," i. 40b.
See also the Rambam's introduction to the Mishna 15:15 where he writes
Afterward, [R Yehuda Hanasi] divided the material that is in each of the specific categories into sections and he called each one, chapter. And afterward, he divided the material of each chapter into small sections that are clear to understand and easy to know by heart and to teach, and he called the name of each one of these small sections, law (halacha [more commonly referred to as mishnah]).
I remain puzzled about the logic for cutting chapters this way and don't yet understand the rules used.