Atletico Madrid boss Diego Simeone remains intent on signing Diego, who could be freed up by the arrival of Benat Etxebarria at Wolfsburg.
The Rojiblancos have already signed Cata Diaz and Cristian Rodriguez this summer but, according to AS, Coach Simeone is urging the club to pursue Diego, the Brazilian playmaker who made an impressive impact on loan at the Vicente Calderon last season.
The deal is a complicated one however, dependant on various other transfers going through.
Atletico need to sell to free up funds, with midfielder Raul Garcia possibly headed to Athletic Bilbao as a replacement for Javi Martinez.
Meanwhile, a Wolfsburg deal for Real Betis midfielder Benat – another to have been linked with Athletic – could convince the Bundesliga club to part with Diego.
The former Juventus man is unpopular at Wolfsburg, with fans using a recent German Cup tie to display an offensive banner criticising the player.