The news comes just hours after Atletico Madrid assistant coach German Burgos vowed the Spanish giants were on the verge of a deal for the forward.
Chelsea released a statement thanking Torres for his services, it read: “Chelsea Football Club thanks Fernando for his service during the past four seasons and wishes him the very best for the future.”
Torres, 30, joined AC Milan on a two-year loan in August but has yet to rediscover his form and has only managed one goal in 10 Serie A appearances.
Some are suggesting that his switch to Milan is part of a larger plan to secure a loan deal for Alessio Cerci that will take place in January.