The 33-year-old has starred for Atletico Madrid in this past season, culminating in the Spanish league title and defeat in the Champions League final to Real Madrid, yet he is out of contract.
Jose Mourinho has already lined up a £38m deal with his club mate Diego Costa but Tiago's pending signature will no doubt help Costa settle in to life at Chelsea.
Atletico are poised to promote Saul Niguez to Tiago's position, a 19-year-old who has been on loan at Rayo Vallecano and who was wanted by Everton, Arsenal and Liverpool.
Mourinho is looking to add at least three more players to his side with another striker and two defenders key.
They have made enquiries for left-back Filipe Luis at Atletico, made a late check on Luke Shaw's pending transfer to Manchester United and asked about Sevilla's Alberto Moreno who is wanted by Liverpool.
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