Striker Morata had been linked with move to Manchester United in transfer window.
Transfer news: Chelsea agree deal to sign Alvaro Morata from Real Madrid
Chelsea have reached an agreement to buy Spain international striker Alvaro Morata from Real Madrid for a reported €80 million (Dh338.4m), the two clubs announced on Wednesday.
"Chelsea Football Club and Real Madrid have agreed terms for the transfer of Alvaro Morata to Stamford Bridge," Chelsea said on their club website. "The move is now subject to him agreeing personal terms and passing a medical."
Madrid confirmed the news as well in a brief statement on their website.
"The club wishes to express its thanks for the dedication, professionalism and exemplary conduct displayed by the player over the years, spanning his time in our academy right through to his spell as a member of the first-team squad," the statement added.
Chelsea had reportedly tabled a £62 million (Dh296m) bid for the 24-year-old last week but Madrid, according to Spanish radio station Cadena Ser, have agreed the sale for €80m.
Morata is expected to leave Madrid's training camp in the United States as soon as possible.
British media reported last week that Chelsea had offered Morata a five-year contract at Stamford Bridge worth £150,000 a week.
Real exercised a buy-back clause to bring Morata back from Juventus a year ago, having joined the Italian club in 2014 just days after Antonio Conte's exit in Turin.
He scored 20 goals in 43 appearances last season as Real retained their Uefa Champions League crown while edging Barcelona to the Spanish title.
Morata had previously been linked with a move to Manchester United, but their reported interest ended after the signing of Romelu Lukaku from Everton.
The Spaniard told The Guardian in April that Chelsea manager Conte, who was instrumental in persuading him to sign for Juve, had given him self belief and that he was looking forward to working with the Italian one day.
"I feel indebted to him because he's the coach that most trusted in me, most wanted me, who made me feel I could perform at the highest level," Morata told the newspaper.
Morata's arrival in London could signal the end of his international teammate Diego Costa's time at Chelsea, with the latter strongly tipped for a return to Atletico Madrid.
Costa was granted extra time off by the Blues and has missed the start of pre-season training after the 28-year-old player revealed in June that he was not part of Conte's plans.
The Brazil-born Spain striker is keen on rejoining Atletico despite them not being allowed to register new players until January because of a transfer ban.