The transfer is subject to a medical examination for the former Sporting and Barcelona man, who has been at Benfica for six years.
The 27-year-old Benfica captain, who can play both on the wing and in a more central role, had been targeted by Liverpool for the last few seasons but, after the purchases of Fernando Torres, Andriy Voronin, Ryan Babel and - in particular - right winger Yossi Benayoun, are not in the market for such a player.
The move has signalled the end of Martin Petrov's stay at Atletico, the Bulgaria winger sold to Manchester City for £4.7 million on the same day.
Drenthe keen to make Madrid move
Simao joins Diego Forlan, Luis Garcia, Raul Garcia and Kleber Santana as new summer signings for Atletico, who finished seventh last season and must overturn a 2-1 deficit to Romanian side Gloria Bistrita to qualify for the UEFA Cup.