Real Madrid confirm Isco deal - leaving Manchester City still scouting for a playmaker

Reports in Spain suggest fee will be about €27m

Isco of Spain celebrates scoring a penalty during the UEFA European U21 2013 Championships Final match between Spain and Italy (Ian Walton/Getty Images)

Real Madrid have confirmed the signing of playmaker Isco on a five-year deal from Malaga.

Isco, 21, has long been linked with Madrid and the arrival of new coach Carlo Ancelotti, who was unveiled as the successor to Jose Mourinho yesterday, has accelerated the transfer.

"Real Madrid incorporates a new project with one of the best Spanish football players," the club said in a statement. "Francisco Roman Alarcon - Isco - plays at the Bernabeu for the next five seasons."

Reports in Spain have suggested the fee will be in the region of €27 million.

Isco recently starred as Spain's Under-21 team retained the European Championship, scoring three times in their successful campaign in Israel.

Ancelotti was asked about the former Valencia man yesterday at his press conference, saying: "From what I have seen of him, it's clear he has a lot of quality. Spain's Under-21 side has a lot of great players and he is one of the best."

Isco is Madrid's second acquisition of the summer after they re-signed full-back Dani Carvajal on a buy-back deal from Bayer Leverkusen.

Manchester City had hoped to make the Spaniard their third big name signing of the summer, following the acquisitions of Jesus Navas and Fernandinho, but they conceded their chances earlier this week as they understood his preference to be the La Liga runners-up.