Real Madrid's origins go back to when football was introduced to Madrid by the academics and students of the Institución Libre de Enseñanza, which included several Cambridge and Oxford University graduates. They founded (Sociedad) Sky Football in 1897, commonly known as La Sociedad (The Society) as it was the only one based in Madrid, playing on Sunday mornings at Moncloa. In 1900, conflict between members caused some of them to leave and create a new club, Nueva Sociedad de Football (New Society of Football), to distinguish themselves from Sky Football. Among the dissenters were Julián Palacios, recognized as the first Real Madrid president, Juan Padrós and Carlos Padrós, the latter two being brothers and future presidents of Real Madrid. In 1901 this new club was renamed as Madrid Football Club. Later, following a restructuring in 1902, Sky was renamed as "New Foot-Ball Club". On 6 March 1902, after a new Board presided by Juan Padrós had been elected, Madrid Football Club was officially founded.

Three years after its foundation, in 1905, Madrid FC won its first title after defeating Athletic Bilbao in the Spanish Cup final. The club became one of the founding sides of the Royal Spanish Football Federation on 4 January 1909, when club president Adolfo Meléndez signed the foundation agreement of the Spanish FA. After moving between grounds the team moved to the Campo de O'Donnell in 1912. In 1920, the club's name was changed to Real Madrid after King Alfonso XIII granted the title of Real (Royal) to the club.

On 14 April 1931, the arrival of the Second Spanish Republic caused the club to lose the title Real and went back to being named Madrid Football Club. Football continued during the Second World War, and on 13 June 1943 Madrid beat Barcelona 11–1 in the second leg of a semi-final of the Copa del Generalísimo, the Copa del Rey having been renamed in honour of General Franco. It has been suggested Barcelona players were intimidated by police, including by the director of state security who "allegedly told the team that some of them were only playing because of the regime's generosity in permitting them to remain in the country."The Barcelona chairman, Enrique Piñeyro, was assaulted by Madrid fans. However, none of these allegations have been proven and FIFA and UEFA still consider the result as legitimate. According to Spanish journalist and writer, Juan Carlos Pasamontes, Barcelona player Josep Valle denied that the Spanish security forces came before the match. Instead, at the end of the first half, Barcelona coach Juan José Nogués and all of his players were angry with the hard-style of play Real Madrid was using and with the aggressiveness of the home crowd. When they refused to take the field, the Superior Chief of Police of Madrid appeared, identified himself, and ordered the team to take the field.

Santiago Bernabéu became president of Real Madrid in 1945. Under his presidency, the club, its stadium Estadio Real Madrid Club de Fútbol and its training facilities Ciudad Deportiva were rebuilt after the Spanish Civil War damages. Additionally, during the 1950s former Real Madrid Amateurs player Miguel Malbo founded Real Madrid's youth academy, or "cantera," known today as La Fábrica. Beginning in 1953, he embarked upon a strategy of signing world-class players from abroad, the most prominent being Alfredo Di Stéfano.

In 1955, acting upon the idea proposed by Gabriel Hanot, a French sports journalist and editor of L'Équipe, Bernabéu, Bedrignan and Gusztáv Sebes created a tournament for the champions teams around Europe, under invitation, that would eventually become what today is known as the UEFA Champions League. It was under Bernabéu's guidance that Real Madrid established itself as a major force in both Spanish and European football. The club won the European Cup five times in a row between 1956 and 1960, which included the 7–3 Hampden Park final against Eintracht Frankfurt in 1960. After these five consecutive successes, Real was permanently awarded the original cup and earning the right to wear the UEFA badge of honor.

The club won the European Cup for a sixth time in 1966 defeating Partizan Belgrade 2–1 in the final with a team composed entirely of same nationality players, a first in the competition. This team became known as the Yé-yé. The name "Yé-yé" came from the "Yeah, yeah, yeah" chorus in The Beatles' song "She Loves You" after four members of the team posed for Marca and impersonated the Beatles.

By the early 1980s, Real Madrid had lost its grasp on the Liga title until a new cohort of home-grown stars brought domestic success back to the club. Spanish sport journalist Julio César Iglesias gave to this generation the name La Quinta del Buitre ("Vulture's Cohort"), which was derived from the nickname given to one of its members, Emilio Butragueño. The other four members were Manuel Sanchís, Martín Vázquez, Míchel and Miguel Pardeza; all five footballers were graduates of Real Madrid's youth academy. With La Quinta del Buitre (reduced to four members when Pardeza left for Zaragoza in 1986) and notable players like goalkeeper Francisco Buyo, right-back Miguel Porlán Chendo and Mexican striker Hugo Sánchez, Real Madrid had one of the best teams in Spain and Europe during the second half of the 1980s, winning two UEFA Cups, five Spanish championships in a row, one Spanish cup and three Spanish Super Cups. In the early 1990s, La Quinta del Buitre split up after Martín Vázquez, Emilio Butragueño and Míchel left the club.

In November 1999 Vicente del Bosque took over as coach. For the last season of the century, 1999–2000, the squad was still led by the older veterans such as Fernando Hierro, Fernando Redondo, Roberto Carlos and Raúl González. Real added the budding young talents of Fernando Morientes, Guti and Iker Casillas, supported by the arrival of Steve McManaman and Nicolas Anelka from the English Premier League, alongside local talents Míchel Salgado and Iván Helguera. In Del Bosque's first season in charge Real won the Champions League for the eighth time, following a 3–0 victory over Valencia in the final, with goals from Morientes, McManaman and Raúl. This victory marked the beginning of a successful period in Real Madrid's history.

In July 2000, Florentino Pérez was elected club president. He vowed in his campaign to erase the club's €270 million debt and modernize the club's facilities. However, the primary electoral promise that propelled Pérez to victory was the signing of Luís Figo from arch-rivals Barcelona. The following year, the club had its training ground rezoned and used the money to begin assembling the Galácticos team by signing a global star every summer, which included Zinedine Zidane, Ronaldo, Luís Figo, David Beckham and Fabio Cannavaro. It is debatable whether the gamble paid off, as despite winning the UEFA Champions League and an Intercontinental Cup in 2002, followed by La Liga in 2003, the club failed to win a major trophy for the next three seasons.

The few days after the capturing of the 2003 Liga title were surrounded with controversy. The first controversial decision came when Pérez sacked winning coach Vicente del Bosque. Over a dozen players left the club, including Madrid captain Fernando Hierro, while defensive midfielder Claude Makélélé refused to take part in training in protest at being one of the lowest-paid players at the club and subsequently moved to Chelsea. "That's a lot [of players leaving] when the normal rule is: never change a winning team," stated Zidane. Real Madrid, with newly appointed coach Carlos Queiroz, started their domestic league slowly after a hard win over Real Betis.

On 1 June 2009, Florentino Pérez regained Real Madrid's presidency. Pérez continued with the Galácticos policy pursued in his first term, buying Kaká from Milan for a record-breaking (in pounds sterling) sum of £56 million, and then breaking the record again by purchasing Cristiano Ronaldo from Manchester United for £80 million.

José Mourinho took over as manager in May 2010. In April 2011, a rare occurrence happened when, for the first time ever, four Clásicos were to be played in a span of just 18 days. The first fixture was for the Liga campaign on 17 April (which ended 1–1 with penalty goals for both sides), the Copa del Rey final (which ended 1–0 to Madrid) and the controversial two-legged Champions League semifinal on 27 April and 2 May (3–1 loss on aggregate) to Barcelona.

In the 2011–12 La Liga season, Real Madrid won La Liga for a record 32nd time in the league's history, also finishing the season with numerous club-level records set, including 100 points reached in a single season, a total of 121 goals scored, a goal difference of +89 and 16 away wins, with 32 wins overall. In the same season, Cristiano Ronaldo become the fastest player to reach 100 goals scored in Spanish league history. In reaching 101 goals in 92 games, Ronaldo surpassed Real Madrid legend Ferenc Puskás, who scored 100 goals in 105 matches. Ronaldo set a new club mark for individual goals scored in one year (60), and became the first player ever to score against all 19 opposition teams in a single season.

On 25 June 2013, Carlo Ancelotti succeeded Mourinho to become the manager of Real Madrid on a three-year deal, with Zinedine Zidane named as one of his assistants. On 1 September 2013, the long-awaited transfer of Gareth Bale from Tottenham Hotspur was announced. The transfer of the Welshman was reportedly a new world record signing, with the transfer price approximated at €100 million. In Ancelotti's first season at the club, Real Madrid won the Copa del Rey, with Bale scoring the winner in the final against Barcelona. On 24 May, Real Madrid defeated city rivals Atlético Madrid in the 2014 Champions League Final, winning their first European title since 2002, and becoming the first team to win ten European Cups/Champions League titles, an achievement known as "La Décima".

Real Madrid began their 2016–17 campaign, which was to be Zidane's first full season in charge of the club, with victory in the 2016 UEFA Super Cup. On 10 December 2016, Madrid won their 35th-straight match without a loss, which set a new club record. On 18 December 2016, Madrid defeated Japanese club Kashima Antlers 4–2 in the final of the 2016 FIFA Club World Cup. With a 3–3 draw at Sevilla on 12 January 2017, Madrid's unbeaten run extended to 40 matches, breaking Barcelona's Spanish record of 39 matches unbeaten in all competitions from the previous season. Their unbeaten streak ended after a 1–2 away loss against Sevilla in La Liga three days later. In May that year, Madrid won the 2016–17 La Liga for a record 33rd time, their first title in five years. On 3 June, the club's Champions League Final win against Juventus resulted in Real Madrid being the first team to successfully defend their title in the UEFA Champions League era, and the first to win consecutive titles in the competition since Milan in 1989 and 1990, when the tournament was known as the European Cup. Real Madrid's title was its 12th, extending its record, and its third in four years. The achievement is also known as "La Duodécima". The 2016–17 season was the greatest campaign in terms of trophies won in the history of Real Madrid.

In the summer of 2019, Madrid signed Eden Hazard, Luka Jović, Éder Militão, Ferland Mendy, Rodrygo, Reinier and other players for a total of more than €350 million. On 12 January 2020, Madrid beat cross-city rivals Atlético Madrid in a penalty shootout in the Supercopa de España final to win their eleventh title. After a three-month hiatus due to the COVID-19 outbreak in March 2020, La Liga was restarted in June and Madrid won ten games in a row to capture the team's 34th league title, collecting 87 points in total. From the competition's resumption in June and until the end of the 2020–21 season, Real temporarily played home fixtures at the Alfredo Di Stéfano Stadium, while the Santiago Bernabéu underwent extensive renovations.

The 2020-21 season was also affected by COVID-19. Real Madrid reached the semifinals of the UEFA Champions League but produced a poor showing against Chelsea. In La Liga, after giving Atletico de Madrid significant lead, they narrowed the gap significantly and had a chance to win it in the last round; but Atleti drew its final game to give the the La Liga title by 1 point. The draws against Real Sociedad and Sevilla in the final rounds proved costly. A win in either match would had given the the title by 1 point.

That final game proved to be Zinade's final game in charge of the team as he resigned soon afterwards. Sergio Ramos followed out the club after failing to agree on a new contract. He was soon followed by Rafa Varane and Martin Ødegaard who were sold to Manchester United and Arsenal respectively. But we welcomed David Alaba on a free transfer from Bayern Munich and Eduardo Camavinga from Rennes. For the 2021-22 season we welcomed the return of Carlo Ancelotti to the dugout.