The Catalan club have said no to the bid from the club looking to replace Serio Aguero, as they will not sell the former Fiorentina man on the cheap
The Spanish capital club are keen to add to their attacking options after the €40 million sale of Sergio Aguero to Manchester City and following news that Diego Costa will be sidelined for a period of at least six months with an injury.
Osvaldo was in good form last season for Espanyol and scored 14 goals in all competitions to attract the attention of a number of clubs in Europe.
Reports in Spain suggest that Atletico's €12 million for Osvaldo has been rejected by Espanyol as it falls short of the club's €20 million valuation of the striker.
Osvaldo, a former Italy Under-21 international, joined Espanyol in a €4.6 million switch last summer after a year on loan at the club.