"Chelsea Football Club has today agreed terms with Atletico Madrid for the transfer of Diego Costa," Chelsea said in a statement.
"The transfer will be subject to the agreement of personal terms and a medical."
Atletico said the 28-year-old Brazil-born Spain international, who left the club to join Chelsea in 2014, would have a medical in the next few days before completing the move in the New Year.
Spanish media said that Atletico, who face Chelsea in the Champions League next Wednesday, had agreed a club-record fee of around 55 million euros ($65.55 million) to resign Costa.
Costa has not featured for Chelsea since the FA Cup final in May, following which he said manager Antonio Conte sent him a text telling him he was not in his plans for the new season.
The striker won two league titles in three years at Stamford Bridge, scoring 52 goals in 89 appearances.
With the European transfer window closed and Atletico banned from registering new players until 2018 for breaching FIFA rules, Costa will be unable to play for Atletico until Jan. 2.
He would, however, be allowed to train with his new team mates until then.
Costa joined Atletico in 2006 and following a string of loan spells established himself as a key part of Diego Simeone’s title winning side in 2013-14 before joining Chelsea in a deal worth 32 million pounds
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