Conor Gallagher is scheduled to travel to Spain on Monday to finalize his transfer to Atletico Madrid.
Chelsea accepted a deal in the region of £34m from the LaLiga club last week and could not find consensus with the player over new contract terms to keep him at Stamford Bridge.
Two other top six Premier League clubs asked Chelsea about Gallagher in the past few days but he has decided to join Atletico Madrid.
Gallagher made his final decision to join Atletico Madrid just one minute before the deadline at the end of the weekend.
Should talks progress smoothly and a medical be completed, he is expected to sign a five-year contract.
TrendingChelsea accepted a larger bid from Aston Villa for Gallagher this summer, but he decided to reject a move to Villa Park and stay at Stamford Bridge. Tottenham remain interested in Gallagher.
Chelsea would prefer to sell him to a club abroad rather than a Premier League rival.
Chelsea are assessing potential replacements should Gallagher leave the club.
News understands one of several options they are keen on is Matt O'Riley at Celtic.
O'Riley has been the subject of bids from Atalanta this summer, and he has further interest from other clubs in the Premier League, including Brighton, and abroad.
Atletico Madrid made a bid for O'Riley in January.
News' chief reporter Kaveh Solhekol:
Conor Gallagher's Chelsea career was effectively over after he was told last week he would be a squad player if he stayed because of the new style of play.
Atletico Madrid offered him the long contract he wanted and Champions League football. They gave him until the end of the weekend to decide if he wanted to move there and Chelsea made it clear it would be the right move for him if he wanted a long-term deal.
Chelsea did not want him to run down his contract and leave on a free next summer. They did not want a repeat and distraction of the Antonio Rudiger and Andreas Christensen situations.
Gallagher was due to train at Cobham on Monday if he had turned down the move to Spain. Chelsea's first team squad are in the US until Wednesday.
Gallagher's departure will be controversial because he has been at the club since he was eight and he has established himself as a key player and fan favourite. Former head coach Mauricio Pochettino made him captain last season.
Many Chelsea supporters wanted Gallagher to be offered a long-term contract but the latest club offers were for a two-year deal plus the option of another year.
The latest 2+1 offer was rejected last week. Chelsea did not offer a longer deal because they were concerned that he would be a squad player in the new high-possession style they are committed to playing under new head coach Enzo Maresca.
It could also have had financial PSR implications for Chelsea so it was felt that it would have been a mistake for both parties to commit to a longer teem deal.
Chelsea respected the fact that he is an England international who needs to be a regular starter. A longer contract could have tied him up as a squad player and jeopardised his place in future England squads.
He turned down extension offers because he wanted a longer contract similar to the ones which have been signed by his teammates.
The salary Chelsea offered him was comparable to the highest earners in their midfield and is believed to have been comparable to other salary offers he had received.
Gallagher also turned down interest in a contract extension in the autumn of 2022 because he wanted to be a regular starter and not a squad player. He became a regular starter last season.
Chelsea are in talks with Atletico Madrid to sign striker Samu Omorodion for a fee of about £35m.
Any potential deal is likely to depend on whether Atletico can sign another forward.
Atletico are in talks with Man City over a deal for Julian Alvarez but have not yet met their valuation.
The 2024 summer transfer window officially closes on August 30 at 11pm UK time in the Premier League and 11.30pm in Scotland.
The Premier League has brought forward Deadline Day to link up with the other major leagues in Europe. The closing dates were set following discussions with the leagues in England, Germany, Italy, Spain and France.