Manchester City will meet Scottish champions Celtic and manager Pep Guardiola’s former club Barcelona in the Champions League group stage.
German side Borussia Monchengladbach will be the other team in Group B.
Premier League champions Leicester will play Porto, Club Brugge and FC Copenhagen in their debut campaign.
Arsenal have been drawn alongside Paris St-Germain, Basel and Ludogorets, with Tottenham facing Monaco, CSKA Moscow and Bayer Leverkusen.
Spanish side Real Madrid beat neighbours Atletico on penalties in last season’s final, becoming European champions for a record 11th time.
Zinedine Zidane’s side meet German outfit Borussia Dortmund, Portugal’s Sporting Lisbon and Legia Warsaw of Poland.
Guardiola, who replaced Manuel Pellegrini at the end of last season, is Barcelona’s most successful boss, leading the Spanish club to 14 major trophies between 2008 and 2012.
He helped the Catalans, who are five-time European champions, win the Champions League in 2009 and 2011.
After leaving the Nou Camp, the former Spain midfielder took charge of German side Bayern Munich and lost to his former side in the 2014-15 Champions League semi-finals.
City, who lost to champions Real Madrid in the semi-finals last season, qualified for the group stage thanks to a 6-0 aggregate win over Romania’s Steaua Bucharest.
As well as facing Barcelona for a third time in four seasons, City also return to Monchengladbach, whom they beat home and away in last season`s group stage.
‘It is not a nightmare draw because we are in a wonderful competition - but it is a very tough group,’ City director of football Txiki Begiristain said.
‘Pep knows the group very well - obviously Barcelona but also Borussia Monchengladbach from his time in Germany.’