With Diaz entering the final six months of his contract at the Etihad Stadium, it is understood City have made a decision to cash in on the Spanish youngster now rather than risk losing him for free in the summer.
The MEN report that the deal involved a clause in his contract that states City will receive a 15 per cent sell on fee if Real were ever to sell Diaz.
Brahim encapsulates the sort of player that Real Madrid president Florentino Perez wants to bring to the club, with the combination of his contract situation and status as one of Spanish football's hottest young properties making him a unique opportunity. A woman told the paper that the unidentified...More news: Trump will rule out concrete wall to end shutdown
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The Spanish youth global came through City's youth academy and has made 15 first-team appearances for the English side.
Manchester City manager, Pep Guardiola has ruled out the possibility of midfielder, Phil Foden leaving the club this January transfer window.
"I have arrived at a club that I dreamed of playing for as a child", an emotional Diaz said. Diaz will complete his medical on Monday afternoon and will be unveiled "on the Santiago Bernabéu pitch for the first time in a Real Madrid C.F. shirt, before addressing the press in the media room". I will give everything from the first day'. The England under-21 global has yet to start a Premier League game but sources say he is viewed as the successor to David Silva with Pep Guardiola determined to make him a first-team regular.