Real Madrid president Florentino Perez says Isco will sign for them next week, after agreeing to join them ahead of Manchester City.
Isco refused to talk about his future following the European Under-21 Championship, where he starred in Spain's success.
Although he did admit Real Madrid would be an 'exciting option' before heading off on holiday at the weekend.
Now, after the club unveiled Carlo Ancelotti as their new boss, Perez has revealed that Isco is on his way to the Spanish capital rather than Manchester.
Speaking to national Spanish radio station RNE he said: "There is an agreement with the club [Malaga] and the player.
"Isco will be presented next week, all he needs is to overcome the medical examination."
It is claimed that Isco has agreed a five-year deal with an option for a sixth at the Santiago Bernabeu.
He will become Real's third signing of the summer after Dani Carvajal arrived from Bayer Leverkusen and they completed a permanent deal for Casemiro.