Real Madrid's new, old president Florentino Perez has appointed ex-Villareal manager Manuel Pellegrini to take the club forward.
The 55-year-old Chilean will leave Villarreal to take over at the Bernabeu. Several media outlets have reported that Real would pay Villareal four million euros in compensation.
Pellegrini joined Villarreal from River Plate in 2004 and has been successful for five seasons.
Pellegrini has brought Villareal success through young talent while playing attractive football. His management has taken Villareal consistently to European competitions.
Pellegrini led Villareal to second place behind Real Madrid in La Liga in 2008, the Champions League semifinals in 2006, and the quarterfinals this year.
Pellegrini replaces former Sevilla manager Juande Ramos, who was appointed until the end of the season after Bernd Schuster was sacked in December.
Ramos led the team well and motivated the players to a major revival, bringing the deficit down from 12 to four points.
However, after a series of poor results that caused the morale at Santiago Bernabeu to detoriate drastically, Perez has now opted not to renew Ramos' contract.
Cristiano Ronaldo, Kaka, and Franck Ribery have been linked with possible moves to Real Madrid as Perez believes that up to six new signings are needed to start the rebuilding process at the club.