Morata moved to Atletico in the January transfer window on a temporary basis after an unconvincing career in England that saw him score 24 goals in 72 games for Chelsea, winning one FA Cup in the process.
The 26-year-old will however remain in Spain permanently with Chelsea agreeing a £50m deal which will come into force at the end of the 2019/2020 season.
“Atletico Madrid and Chelsea have reached an agreement over the transfer of Alvaro Morata from July 1, 2020,” the Rojiblancos announced on their official website.
“The Spanish striker will play at our club on loan this season, as was agreed when he joined Atletico Madrid in the January transfer window, and the move will become permanent at the beginning of the 2020-21 season.
“Morata made his debut at our club on February 3 against Betis. Since then, the Spaniard has played 17 games and scored six goals.”
Chelsea had earlier on threatened to recall Morata unless Atletico parted with the said amount to secure his services permanently.
Morata has on several occasions reiterated his desire to remain at the Wanda Metropolitano after he scored six goals in 17 games.
"Happy. It's official now,” Morata tweeted after the announcement of the deal.
"Now I'll have time to return with work and goals for all the effort of the club and the affection of the fans. Thank you!!!"
Atletico Madrid have been busy in the transfer window after securing the signings of Joao Felix, Felipe, Hector Herrera and Marcos Llorente while Antoine Griezmann is likely to follow Diego Godin and Lucas Hernandez out of the club.
