The 23-year-old, who was also a transfer target for Chelsea, flew into the Spanish capital on Monday morning, with Portuguese radio station TSF later reporting that a deal was "imminent."
And the Portugal international has got his desired move, with Benfica and Real agreeing an undisclosed fee.
Coentrao has signed a five-year contract at the Bernabeu, with Argentine defender Ezequiel Garay move to the Portuguese club as part of the deal.
Benfica had earlier issued a statement to the Comissão do Mercado de Valores Mobiliários (CMVM) stock market which read: "Benfica come to inform it is in negotiations with Real Madrid for the transfer of the sporting rights of athlete Fabio Coentrao."
The left-back had a €30million release clause in his contract with Benfica, although it is thought that Los Blancos have paid several million euros less than that figure.
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