The Spanish side, who have just sold Sergio Aguero to Manchester City, have agreed a ?35million deal possibly rising to ?40m for the Colombian striker.
Falcao - nicknamed 'El Tigre' (The Tiger) - was a key player for Porto last season, scoring 34 goals to help it win four trophies, including the Portuguese title, in a 30-game unbeaten league run.
Big money move: Falcao has swapped Portugal for Spain
The 25-year-old Falcao scored the only goal in the Europa League final in Dublin.
He was linked to a move to London when former Porto boss Andre Villas-Boas joined Chelsea earlier in the summer, but a move to Atletico was his favoured option.
Moving on: Sergio Aguero left Atletico Madrid in the summer for Manchester City
Porto paid Argentine club River Plate ?3.41m for Falcao in 2009.
Porto also said they have sold Portugal midfielder Ruben Micael to Atletico for ?4.3m as well.
?CLICK HERE TO SIGN UP FOR OUR FREE FANTASY FOOTBALL GAMEAtletico Madrid set to beat Chelsea to Falcao signature as they chase Aguero replacementChelsea move for Falcao looks doomed after Porto hotshot agrees new deal to stay putAll the latest Chelsea news, features and opinion
?
Source: Daily Mail
Source: Daily Mail