Atwater was drafted out of the University of Arkansas by the Broncos with the 20th pick in the first round of the 1989 NFL Draft. The Broncos began the draft with the 13th overall pick and were hoping to upgrade their defense which had ranked 27th (out of a possible 28) against the run the previous year. Knowing that Atwater would be available in the later parts of the first round, the Broncos traded down to the 20th overall pick owned by the Cleveland Browns who selected Eric Metcalf with Denver's 13th overall pick. Atwater was projected by most as the second-best safety in the draft behind Louis Oliver who was selected by the Miami Dolphins with the 25th overall pick. However, then-head coach Dan Reeves selected Atwater over Oliver because of his leadership skills which Reeves felt were badly needed following the defense's let downs during the 1988 season.
New defensive coordinator Wade Phillips employed Atwater close to the line of scrimmage in order to fortify Denver's run defense and he led the team in tackles, finishing with 129 tackles his rookie season. Denver's defense jumped an 20 spots to finish 7th against the run and tied for 3rd best in yards per carry with a 3.7 yard average. That same year, Atwater finished 2nd to Kansas City's Derrick Thomas in Defensive Rookie of the Year voting. The additions of rookies Atwater and Bobby Humphrey, along with key free agent signings, helped Denver rebound from 8-8 in 1988 to AFC Super Bowl representative in 1989.
Atwater's second season marked the first of seven consecutive Pro Bowl selections (19901996), tied for most in franchise history. Over his career, he was selected to the Pro Bowl eight times, second most in franchise history. Early in his career, Atwater teamed with fellow Broncos safety Dennis Smith to form one of the best safety tandems of their generation. Both would later be inducted into the Broncos Ring of Fame. During his 10-year career in Denver, Atwater started in 155 games, tying him for seventh in franchise history for games started. He also started in 14 post-season games.