The 33-year-old has been a key player in Atletico's Spanish title success this season and their progression to the final of the Champions League.
As it stands, the Portuguese will depart Atletico at the end of next month, but Simeone is hopeful that a new deal can be agreed.
"I spoke with Tiago in December and went back again a few days ago. He is a major player, he is strong and an important figure. Hopefully he will continue next season," he told AS.
Arsenal are reportedly keen on the former Chelsea midfielder.