The 46-year-old Argentine had a contract until 2020, but it now runs out at the end of the 2017-18 season.
Simeone is considered one of the world's top managers after leading Atletico to the La Liga title in 2013-14 and two Champions League finals.
He said: "We are fine. I'm happy here. I am guided by feelings and my heart."
Simeone, who has also won the Europa League and Copa del Rey with Atletico, added: "This does not change anything, and the only thing is to see if the lads keep giving me their hearts.
"During the two years we can renew the deal, if they don't want to get rid of me."
Atletico Madrid manager Diego Simeone has confirmed the length of his contract has been reduced, but insists "nothing changes".