French youth international Hernandez, 19, has impressed during a loan spell with Alaves this season, including against Real in a 3-0 win for the European champions on Sunday.
“Real Madrid have reached an agreement with Theo Hernandez… to pay his 24 million euro ($25.6 million) buyout clause and incorporate him from the summer for the next six seasons,” Marca said in an exclusive report.
The deal would break a gentleman’s agreement between the clubs not to sign players from their rivals since Real president Florentino Perez began the first of his two spells in charge in 2000.
Former Argentina winger Santiago Solari was the last player to cross the Madrid divide when he joined Real 17 years ago.
Should Hernandez move, brothers could be facing off in the Madrid derby for years to come as his older sibling Lucas Hernandez, 21, has featured regularly for Atletico this season.
Real and Atletico renew their rivalry at the Santiago Bernabeu on Saturday.
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