"The Nigerian international is already in Madrid to undergo the relevant medical examination and finalise his new contract," Atletico said in a statement on their website.
Atletico gave no details about the transfer fee or the length of contract. Spanish media reported that Atletico would pay 35 million euros for the forward.
The 28-year-old has shone since joining Atalanta in 2022 from Bundesliga side RB Leipzig, netting 55 goals in all competitions.
His standout moment was a hat-trick in Atalanta's 2024 Europa League final triumph over Bayer Leverkusen, a result that secured the Italian club's first European trophy and ended Leverkusen's remarkable 51-match unbeaten run.
Lookman's treble made him the sixth player in history to score three goals in a European club final, and the first since 1975.
Born in London, Lookman began his professional career at Charlton Athletic in 2015, earning a move to Everton in 2017. While he scored on his Premier League debut for the Toffees, he struggled to find consistent opportunities and was loaned to RB Leipzig in 2018.
Following a successful spell in Germany, Lookman made a permanent 22.5 million pounds transfer to Leipzig in 2019.
However, first-team chances proved scarce in the Bundesliga, prompting loans to Fulham and Leicester City in the Premier League before his transformative switch to Serie A with Atalanta.
Now under Diego Simeone at Atletico, Lookman arrives as a key addition to bolster the side, who sit third in LaLiga with 45 points, 10 behind leaders Barcelona.
Atletico will hope the Nigerian's firepower can boost their campaign as they prepare for a two-legged Champions League knockout playoff clash against Club Brugge later this month.