The 18-year-old Toluca striker has moved to the Spanish champion, which is also interested in signing Club America forward Raul Jimenez.
"Young Toluca Red Devils striker Diego Gama will leave for the old continent to try his luck with none other than Atletico Madrid, one of the teams with most tradition and the current Spanish league champion," read the opening of Toluca's statement.
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Gama has been a regular in recent Mexico Under-20 squads and made his Liga MX debut Sunday for Toluca against Leones Negros.
The youngster scored six goals in 13 appearances for Toluca's U-20s last season and nine in 11 games for the U-17s the season before.
He is the son of former Toluca player Jorge Anibal Gama, who featured for the club in the 1980s.
Gama is likely to be joined at Atletico Madrid by fellow Mexican striker Raul Jimenez, who is on the brink of making the move from Club America.