Nacho is reportedly close to signing a new contract with the LaLiga giants that will keep him with the club until 2024, according to Gianluca Di Marzio.
The 33-year-old has been a member of Los Blancos since he was a child and was set to become a free agent at the end of June.
He has now reversed his decision and will remain with Carlo Ancelotti.
Nacho’s contract extension is a setback for Inter Milan, who were rumored to be interested in signing him on a free transfer this summer.
Nacho had been given a three-year contract by the Nerazzurri.