The Spanish champions must close off at least 5,000 seats at the 68,456-capacity Wanda Metropolitano.
Uefa’s punishment is for the “discriminatory behaviour” of Atletico fans during last week’s first-leg match in Manchester, where City won 1-0.
Atletico will also have to display a Uefa banner reading “#NoToRacism”.
“To order the partial closure of the Club Atlético de Madrid stadium during the next Uefa competition match in which Club Atlético de Madrid would play as the host club, for the discriminatory behaviour of its supporters,” read a Uefa statement. “Club Atlético de Madrid shall inform prior to the match, the sector[s] to be closed, which shall at least comprehend 5,000 seats.”