The Belgium international, who can play at right back as well as his more natural center back role, fills the void left by Dejan Lovren's exit on a season-long deal.
The Belgium international center back, who can also play on the right of the back line, becomes the eighth player recruited by Saints manager Ronald Koeman this summer.
The 25-year-old was part of the Atleti side which unexpectedly won La Liga in 2013-14, his first season at the Estadio Vicente Calderon, but made only 12 appearances for Diego Simeone's men.
Simeone had confirmed earlier in August that there were "options" for Alderweireld to leave the club, having struggled to force his way into the first XI since leaving Ajax.
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The Belgian joins Florin Gardos as options at center back for the Saints, who sold Dejan Lovren to Liverpool for 20 million pounds earlier this summer.