The Spaniard joins on an initial 18-month loan deal, having become surplus to requirements at Stamford Bridge following the arrival of Gonzalo Higuain on loan from Juventus.
It marks a return to the club where Morata began his youth career, before eventually starting his professional career with rivals Real Madrid.
He scored 24 goals in 72 appearances for the club, but struggled to nail down a regular first team spot, with new manager Maurizio Sarri sometimes opting deploy Eden Hazard in a false nine role at the spearhead of his attack.
Speaking to Atletico’s club website, Morata said: “I feel very happy. I am very content and very proud to be here, I can’t wait to train, to be with my teammates and to play.”
On Sunday, Atletico forward Gelson Martins joined AS Monaco, paving the way for Morata’s arrival.