The 32-year-old has only made seven appearances this season following a string of injuries while he has faced tough competition for minutes up top against the likes of Luis Suarez and Joao Felix.
Having entered the final year of his deal, Atletico have decided not to offer Costa a new deal which will allow him to leave on a free next summer, according to Italian journalist Fabrizio Romano.
Costa will also be put up for sale in the January transfer window, which is due to open next week, allowing the veteran striker to find a new club before next summer's delayed Euro 2020.
The report also suggests that Atletico have already found Costa's replacement in the form of Napoli outcast Arkadiusz Milik, who has previously been linked with Tottenham and Everton.
Should Atletico land Milik and get a suitable offer for Costa next month, it would end any hopes of a reunion between the Spaniard and his former club Chelsea, who meet Diego Simeone's side in the knockout stages of the Champions League in February.
Costa was quick to react to Atletico drawing the Blues in the Champions League earlier this month, as he replied to Marcos Alonso's Instagram post with a number of eye emojis in anticipation for the game.
However, a move away from the Wanda Metropolitano would scupper plans to face his old side in their two-legged round of 16 clash.
PSG and Spurs have both registered interest in signing Costa earlier this summer.
Costa has spent seven seasons in Madrid over the last decade which included his stint at Stamford Bridge from 2014 to 2017.
He has made 215 appearance for the Spanish side and has 83 goals and 36 assists to his name.
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