The Spaniard was heavily linked with a move to West Ham in the summer after leaving Serie A side Napoli.
Benitez was the frontrunner to replace Sam Allardyce in the Upton Park hotseat, but was appointed Real Madrid manager after the Spanish side made their interest in the manager clear.
West Ham eventually installed Slaven Bilic as their new boss, but joint-chairman David Sullivan has revealed Benitez was only “three hours” away from sealing a return to the Premier League.
“Rafa Benitez was within three hours of signing for us,” Sullivan said, as quoted by the London Evening Standard.
“Every clause in his contract was agreed and then he went to Real Madrid. It was a real blow because he is a really experienced manager in England and done really well in Italy.
“We had an agreement in place but you have to pick yourself up, look who else is available and pick the best you can.”
Despite more or less admitting Bilic was not the club’s first choice for boss, Sullivan has reiterated his support for the already under-pressure Croatian, with back-to-back defeats raising questions over his side.
“Whoever you take is a gamble. The bottom line is we have a manager. He has our 100 per cent support. We will support him in the transfer market. We like him.”