Table toppers Atletico remain the league's only unbeaten side after 10 games with 26 points from a possible 30.
Heading into the derby they sit six points ahead of fourth-placed Real with a game in hand and Zidane conceded that their start to the campaign means it is Diego Simeone's side who are the team to beat this term.
"Yes, definitely, they should (be considered title favourites)," Zidane told a news conference.
"That's what they're showing on the pitch. They are top of the table and they've always been a competitive outfit in that sense. We know them well.
"We want to win every game and especially this one as it's a big game. We won the league last year and we want to defend our crown, and we'll do that until the end."
The Frenchman also sung the praises of Atletico's in-form midfielder Marcos Llorente. The 25-year-old came through the youth set-up at Real before joining their city rivals in 2019.
"He's not surprising me with his performances," Zidane said.
"Llorente is a top-class player and he's showing another facet of his game right now that he didn't have when at Real Madrid. We always knew he was a quality player and I'm pleased to see him doing well."
Zidane, who welcomed back captain Sergio Ramos in Wednesday's Champions League win over Borussia Moenchengladbach, said midfielder Federico Valverde and fullback Dani Carvajal will also be in contention for a return to the team.
The champions will, however, be without attacking trio Eden Hazard, Luka Jovic and Mariano Diaz plus midfielder Martin Odegaard.
Atleti coach Diego Simeone refused to be drawn on Zidane's assertion that they are now title favourites.
"I'm not going to talk about other people's opinions," he said. "People have their opinions and say what they believe and I respect that.
"Madrid have been competing at the top for a number of years and you have to admire that, their players and how they keep going year after year.
"We'll try and take the game where we can do them damage and I'm sure it'll be a great match to watch."
Atletico forward Diego Costa and defender Jose Maria Gimenez will both miss the cross-city trip through injury.
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