The 27-year-old midfielder had been with Atletico since 2012, making 188 appearances, in which time he won both the Europa League and Super Cup in 2018, and was a Champions League runner-up in 2016.
Thomas Partey made 46 appearances for Atletico last season, playing a key role in their third-placed finish in La Liga and reaching the quarter-finals of the Champions League.
During his career, Thomas has also enjoyed successful loan spells in Spain with RCD Mallorca (2013/14) and UD Almeria (2014/15), and has made 29 international appearances for Ghana.
Thomas will wear the No 18 shirt and will join up with his Arsenal team-mates next week after he returns from international duty with Ghana.
Reacting to the deadline day signing, Arsenal boss Mikel Arteta said: “We have been watching Thomas Partey for a while, so we’re now delighted to add such a high quality player to our squad. He is a dynamic midfielder with great energy. He brings a lot of experience from a top club that has competed at the highest level in La Liga and the Champions League for several years.
“We’re very impressed with his attitude and his approach to the game. He’s an intelligent footballer and we’re looking forward to him integrating into our system and contributing to the progress we’re building at the moment at the club.”
Arsenal Technical director Edu added: “Thomas has all the right attributes to be a top player for Arsenal. He is a leader on and off the pitch and he is exactly the kind of player and person we want at the club. We already feel like we know Thomas very well based on the work we have done analysing his performances closely in recent times.
“With his all-round game and positive aggressive style, he will be a brilliant addition to our squad. We’ve made a strong start to the season and we want to continue to build on this with Thomas now part of our club.”