The Blues released a statement this afternoon announcing the deal, which is now subject to the Spain international agreeing personal terms and passing a medical.
Costa, 28, joined Chelsea from Atletico back in 2014 but has never fully settled into life in London despite enjoying plenty of success on the pitch.
The Brazilian-born striker was Chelsea’s top scorer in both Premier League title victories in 2014/15 and 2016/17, but was told by manager Antonio Conte at the end of last season that he was no longer in his plans.
Costa was initially expected to leave the west Londoners during the summer, but Atletico’s transfer embargo – which ends in January – seemed to complicate the deal.
The two clubs have now confirmed that an agreement is in place for Costa to make the move back to La Liga when the transfer window re-opens in January, with various reports suggesting there should be no further complications in terms of the player agreeing to the move and completing any medical examinations.
Finishing touches on the deal could even be done in time for Chelsea’s visit to Atletico Madrid in the Champions League next Wednesday.
Costa had also been linked with the likes of AC Milan and Paris Saint-Germain in the summer, but the player himself always made it clear a return to Madrid was his priority.
Chelsea moved to sign Alvaro Morata from Real Madrid as his replacement up front, with the 24-year-old getting off to a bright start in the Premier League with three goals and two assists in his first five games.
Costa, meanwhile, has not even been involved in Conte’s side this term after refusing to return to training with the club.