Torres, 30, has been struggling for goals since joining Chelsea from Liverpool in 2011 and moved to Milan on loan in August.
Chelsea and Milan agreed on Saturday to make the switch permanent, paving the way for Torres to be loaned to Atletico, where he will hope to resurrect his stuttering career under inspirational coach Diego Simeone.
The deal is subject to Torres passing a medical and will be finalised on Jan. 5 when the Italian transfer window opens, Atletico said on their website (www.clubatleticodemadrid.com).
"In this way, the forward from Fuenlabrada returns to his home where he was trained as a footballer and became one of their big stars," the club added.
A World Cup and double European Championship winner with Spain, Torres joined Atletico at the age of 11.
Known as 'El Nino' (The Kid), he made his first-team debut as a 17-year-old in 2001, when Madrid's second club were in the second division, and was appointed club captain two years later, becoming a huge favourite with the fans.
When he left for Liverpool in July 2007, having scored 91 goals in 244 appearances, he pledged to return and could make his debut against holders Real Madrid in the first leg of a King's Cup last 16 tie on Jan. 7.
(Reporting by Iain Rogers, editing by Sudipto Ganguly)
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