A report in AS claims that Atletico have paid €3 million to secure the deal for the 26-year-old, with an option to make the deal permanent for €7 million.
Wolfsburg manager Felix Magath told the club’s official website: “I am convinced Diego will play a prominent role at Atletico. I wish him well.”
The Brazilian attacking midfielder had long been linked with the move and will go some way to replacing the likes of Sergio Aguero and Diego Forlan.