Estadio do Dragao star heads to the Vicente Calderon rather than Stamford Bridge.
FC Porto striker Falcao has spurned the advances of Chelsea and signed for Atletico Madrid for a Portuguese record transfer of £34.7million.
The Europa League champions announced the deal could rise to £40million depending on variable factors, like appearances and success.
The 25-year-old has agreed a five-year contract and will arrive in Spain to undergo a medical later today.
The Columbia international was a key player for Porto last season, scoring 34 goals to help win four trophies, including the Portuguese title, in a 30-game unbeaten league run.
‘El Tigre’ will fill the role vacated by Argentina striker Sergio Aguero, who joined Manchester City in a £38million deal last month.
He was tipped to follow former boss Andre Villas-Boas to Chelsea this summer but the La Liga club have acted quickly to complete the move.
Porto are also selling Portugal midfielder Ruben Micael to Atletico for £4.3million.
Atletico said the 25-year-old had agreed to a four-year deal and was set to be loaned out to Spanish club Zaragoza for the season.