Chelsea Conor Gallagher will travel to Madrid on Monday with the intention of signing a five year contract for Atletico following a breakthrough in talks.
Atletico had agreed a £33.7million deal with Chelsea last week and were pressing for an answer by today.
Chelsea had made it clear to Gallagher that it was best for him to move on after 16 years at Stamford Bridge and talks accelerated with the club on Sunday with a resolution met in the early hours.
Gallagher will fly with his representative Paul Nicholls to Madrid to finalise terms and all is expected to be signed off for the England international later today.
Tottenham had kept in touch on developments also but did not press ahead with a rival bid.
Conor Gallagher is set to end his 16-year association with the Blues after agreeing terms with Atletico Madrid
Chelsea had offered a two year contract with an option of another year on two occasions to Gallagher, after they had accepted a £57.5m offer from Aston Villa in June and after Atletico's bid last week.
The 24-year old had been open to staying at the club, where he was captain last season under Mauricio Pochettino, but wanted a longer term deal similar to those offered to teammates.
However, matters came to a head on Friday when he was informed on returning from holiday that he would not be part of the first team dressing room with Chelsea and would likely be reduced to a bit part role if he stayed under Enzo Maresca.
It is understood there are concerns that the academy graduate may not suit Maresca's system as speculation linking him with a permanent exit from his boyhood club continues to grow.
Chelsea have reportedly earmarked Celtic's Matt O'Riley as a potential replacement in midfield. O'Riley netted 18 goals in 37 appearances for Brendan Rodgers' Celtic as the triumphed in the Scottish Premiership last season.
Born in London, O'Riley represented England at multiple youth levels before switching international allegiances to Denmark and making his senior debut last year.