Witsel's contract at Borussia Dortmund expired at the start of this month and he has opted to explore a new challenge away from the Signal Iduna Park.
The 33-year-old spent the last four seasons with Dortmund, having joined from Chinese Super League side Tianjin Quanjian in the summer of 2018.
The Belgium international won the DFB-Pokal with Dortmund in the 2020/2021 season and German Super Cup in 2019.
Witsel counts Standard Liege, Benfica and Zenit Saint Petersburg among his former clubs.
Atletico Madrid manager Diego Simeone was keen to jump at the chance to add Witsel to his midfield options following a woeful defense of their La Liga title last season that ended with a third place finish.
"I decided to come here because for me it's a top club," Witsel said. "I think Atletico Madrid is one of the eight best clubs in the world, and I really wanted to stay in the top level after Dortmund.
"I talked to him [Simeone] a few weeks ago, we had directly a very good feeling. He told me, 'I remember you from 2013', when I played with Zenit at the old stadium.
"I knew he wanted me in the team and I think this is really important when you arrive in a new club. I didn't need my brother Yannick [Carrasco] to tell me I had to come to Atletico Madrid, in my head it was already clear."
