As confirmed on the club's official website, the Croatian midfielder will spend a season with the Blues, who reportedly have the option to sign the player permanently at the end of the deal.
According to BBC Sport, the Blues have made a decision to part ways with Courtois this summer following weeks of speculation regarding his future.
Courtois has been absent from training this week before Thursday's closure of the transfer window for Premier League clubs.
Courtois' actions are set to lead to success and, according to Spanish TV programme El Larguero, Real Madrid are to officially seal the signing of the goalkeeper later this week.
NCAA makes rule change, allows basketball players to have agent
All player-agent relationships, however, must be in writing, disclosed to the NCAA and ended when the player comes back to school. Athletes can also take five beyond October 15 after their high school graduation.
Chelsea have rushed through a deal for Kepa in the last 48 hours after finally confirming Courtois is leaving.
Although his time at Atleti was only ever temporary and the club have since replaced him with Jan Oblak, it's clear plenty of their supporters regard his move to their local rivals as something of a betrayal.
This is likely to be a fast moving story and one that we will keep you updated on if the report in the from multiple sources come to fruition.
Chelsea icon John Terry has poked fun at himself by suggesting he was disappointed not to be considered as Thibaut Courtois' replacement at Stamford Bridge.
Kepa, 23, joins from Athletic Bilbao after Chelsea paid his release clause to bring him to the Premier League. The midfielder will join Jorginho in Chelsea's midfield who joined the Blues from Napoli.