Spain favoured
Reyes has made it clear he has no interest in returning to England.
"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 agreement with Atletico last year only to change his mind at the last moment to join their neighbours, which resulted in the Spanish international paying Atletico compensation.
Should the deal be finalised it will push Atletico's summer spending towards the $95m mark.
Stadium deal 
Meanwhile, the club has signed an agreement with the local council to move to the La Peineta stadium, the focal point of the city's bid for the Olympic Games in 2016.
Their current home, the Vicente Calderon, is to be pulled down and turned into park land after the move which is scheduled for 2010.
La Peineta, which was a part of the unsuccessful 2012 Olympic bid, is being upgraded and expanded to a 73,000 seat arena.
"We are going to a fabulous location, with everything we could need. The agreement is of benefit to Atletico but also to all the people of Madrid," Atletico president Enrique Cerezo said.
Atletico finished seventh in the Primera Liga last season and are in the second qualifying round for the UEFA Cup.