The Danish winger, who joined Blues for £2.2 million from Chelsea in July, has passed a medical and agreed personal terms on a two-and-a-half-year deal with the Spanish side and will officially become an Atletico player in January when the transfer window opens.
Gronkjaer came in for a lot of criticism from Blues fans following his move to the club in the summer and manager Steve Bruce reluctantly agreed to try and cut his losses on the winger who he felt just didn't settle at St Andrew's.
Blues are to receive an estimated £1.4 million fee from the La Liga side for Gronkjaer.