It is claimed that Los Blancos will sell the Colombian international should his €50m valuation be met by a rival club, and the player himself wants to join Diego Simeone’s side.
James has been heavily linked with a permanent exit from Madrid this summer with both Napoli and Atleti said to be the leading candidates.
However, there had been suggestions that no move would come to fruition this summer with Atleti falling short of the valuation and Madrid reluctant to sell to a direct rival, while Napoli wanted an initial loan move for the player.
James has returned to Madrid following a two-year loan spell at the Bavarian club having started just 13 Bundesliga matches this campaign and is said to want more regular first-team football.
The former Porto and Monaco star spent three seasons at Los Blancos, helping them to two European titles, but started just 13 La Liga games in his final campaign.
Napoli boss Carlo Ancelotti brought James from Monaco to the Spanish capital back in 2014