The Black Cats have also negotiated an option to seal a permanent four-year deal for the 22-year-old former Liverpool full-back next summer.
Manquillo, who spent last season on loan at Marseille, follows Papy Djilobodji, Adnan Januzaj, Donald Love, Paddy McNair and Steven Pienaar to the Stadium of Light as manager David Moyes rebuilds his squad.
The Spain Under-21 international, who has played both Champions League and Europa League football for Atletico, arrived on Wearside on Wednesday evening for a medical and the formalities were completed on Thursday morning.
Moyes asked number two Paul Bracewell to carry out his media duties following the 1-0 EFL Cup victory over League One Shrewsbury - the first competitive win of his reign at the Stadium of Light - as he attempted to push home his interest in Manquillo.
The newcomer could go straight into the squad for Saturday's Premier League trip to Southampton, where the Black Cats will attempt to register their first point of the campaign after back-to-back defeats by Manchester City and Middlesbrough.
By then, Moyes will hope to have added further to his squad with the club working feverishly behind the scenes to get him the players he wants before the transfer window closes next Wednesday night.
Moyes' need has been exacerbated by the departure of Younes Kaboul to Watford and the continuing uncertainty over fellow central defender Lamine Kone, although the manager has insisted the Ivory Coast international, who is wanted by Everton, is going nowhere a matter of months after signing a four-and-a-half-year deal.
Kone is currently sidelined by a back injury - he was due to return to training on Wednesday - and his absence, coupled with John O'Shea's hip problem, prompted Moyes to field midfielder Jack Rodwell alongside summer arrival Djilobodji against the Shrews.
The Scot has admitted he would not have thrown the Senegal international, who made his debut against Boro at the weekend, into the mix so soon in an ideal world, but the player is confident he is ready for the Premier League.
Djilobodji said: "When I came here, I was ready to play and do my best for Sunderland, and I am so happy to work with Sunderland and with the coach
Now I am looking forward to winning a lot of games.
"I want to to my job and if I can do well, it's going to be good
I feel good and all the lads feel good
We need the players who are injured to come back and help the team, and we will improve."
Source : PA
Source: PA