The striker made his debut for the Rojiblancos as a 17-year-old and scored 91 goals in 244 appearances before leaving the club in 2007 for Liverpool.
Ill-fated spells at Chelsea and Milan followed, but upon agreeing a permanent transfer to San Siro last week, Torres has now promptly rejoined the club where he started his career.
A statement on Atleti's official website read: "Fernando Torres returns to Atletico Madrid after an agreement was reached between our club and Milan as the international striker will play on loan for the remainder of the season and one more campaign.
"Signing with our club is subject to the relevant medical examination that the player must undergo to join the team.
"The loan will be official on January 5, the day the winter transfer market opens in Italy."
Speculation had been rife that any agreement would see Alessio Cerci go the other way, but for the time being the Italian will remain in the Spanish capital.
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