The Spain international spent last season on loan with Real and helped them win the Primera Liga title, scoring twice in the 3-1 triumph over Real Mallorca in the final day showdown.
But reports in the media say Atletico reached an agreement with Reyes on Friday for a four-year contract and a fee of around nine million euros (£6million), topping a bid from Real by three million euros.
Another suitor, France's Olympique Lyon, appear to be third in line to secure the player. Reyes has made it clear he does not want to return to England and is keen to stay in Spain.
"I am delighted to be staying in Madrid. It is certain I will be staying in the capital, although we'll have to wait a little to see where I will be playing," Reyes told Spanish television station La Sexta.
"It has been difficult working by myself and not being able to share a pre-season with my colleagues. For this reason, I am pleased everything is about to be resolved."
Reyes had a similar pre-agreement with Atletico last year only to turn his back on them at the last moment to join their neighbours. Reyes had to pay Atletico compensation.
If the deal goes through it will take Atletico's close-season spending towards the 70 million euro mark.