The 19-year-old talent enjoyed a stunning breakout season in Portugal's Primeira Liga in 2018-19, scoring 15 goals and setting up another seven in 26 matches.
Joao Felix's form for Benfica resulted in his first call-up to Portugal's senior side and he represented them as they clinched Nations League success earlier this month.
Atletico emerged as the favourites to sign him ahead of Manchester United and Manchester City after Antoine Griezmann announced his intention to leave the Wanda Metropolitano, paving the way for Joao Felix to replace the Frenchman.
Although links between Griezmann and Barcelona have gone quiet, Atletico remain intent on signing Joao Felix, as Benfica confirmed the Spanish club's offer on Wednesday.
Their bid is greater than the player's €120m release clause, but would be paid in instalments.
A Benfica statement released to the Portuguese Securities Market Commission read: "Benfica informs, under the terms and for the purpose of article 248-A of the Portuguese Securities Code, that Atletico Madrid submitted a proposal for the acquisition of the sports rights of the player Joao Felix for a total amount of €126m, which is being analysed.
"It is further informed that the proposed value above the termination clause contemplates the financial cost indexed to the payment of benefits provided for in this proposal.
"In case Benfica accepts the proposal presented, the net to receive from Atletico Madrid on the date of the transfer of the sports rights will amount to €120m."