The 29-year-old, who signs a four-year deal, made just 26 appearances for the Blues in all competitions, winning both the League Cup and Premier League, but was unable to displace first-choice full-back Cesar Azpilicueta.
"Chelsea Football Club has today agreed terms with Atletico Madrid for the permanent transfer of Filipe Luis," read a statement on the club's website. "We wish him all the best in the future."
Atleti are reported to have paid £11.1 million for a player they sold for £15.8m barely a year ago, with Diego Simeone still a big fan of the defender despite his unspectacular stay in the Premier League.
Luis was one of three former Atletico stars to move to Stamford Bridge last summer - along with Diego Costa and returning loanee Thibaut Courtois - but made just nine starts in the Premier League and netted only once for the side, in the League Cup against Derby Country.
The Brazilian failed to convince Jose Mourinho that he could challenge Azpilicueta for a starting role, and the Portuguese boss is expected to dip back into the market to secure a replacement.
Augsburg full-back Baba Rahman has long been linked with a move to west London, though Chelsea have struggled to agree a fee for the £15m-rated Ghana star and are reported to be considering Galatasaray's Alex Telles as an alternative.