The 24-year-old cost City just £14 million when he signed from River Plate in January 2022 and his since enjoyed a meteoric rise, helping Argentina to World Cup and Copa America glory, as well as winning two Premier League titles and the Champions League at club level.
After initially returning to River on loan for six months, Alvarez scored 36 times in two seasons at City as Pep Guardiola's men became the first side ever to win four consecutive English top-flight titles.
However, he still had to play second fiddle to Erling Haaland for the majority of his time in Manchester.
City will be compensated by a club record sale but may now be forced into the market in the final three weeks of the transfer window to find back-up to the Norwegian striker.
The departure of Spain captain Alvaro Morata to AC Milan ensures Alvarez will have no such problems being the main man in the Spanish capital, where he will have the chance to play under compatriot Diego Simeone.
Atletico are tooling up in a bid to challenge Real Madrid and Barcelona at the top of La Liga after a disappointing fourth-placed finish last season.
They have already added Euro 2024 winner Robin Le Normand and Norwegian forward Alexander Sorloth.
Chelsea's Conor Gallagher is also on the verge of signing with the England international having flown out to Madrid to complete a £33 million move.
