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The French midfielder, 26, has been told he can leave the Spanish giants after failing to make any major impact since Jose Mourinho took charge last summer.
Tottenham boss Harry Redknapp is keen to sign a defensive midfielder and has also been strongly linked with a move for West Ham midfielder Scott Parker.
Diarra played under Redknapp at Portsmouth and played the best football of his career when he was at Fratton Park which helped him secure a £20m move to Real Madrid.
But he has failed to fulfil his potential at the Bernabeu and Redknapp has no doubts he can bring the best out of the French midfielder once again.
Tottenham are hoping a deal can be finalised in the near future, although they could face stiff competition from Manchester United who are also closely monitoring his progress.
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