The former Santos defender will join up with Carlo Ancelotti's side in the summer and sign a contract that will run until 2021.
Danilo, 23, has been a mainstay for the Portuguese giants since making the switch to the Dragao in 2012, making over 100 appearances in all competitions.
Known for his attacking forays but also a capable defender, he will compete with Daniel Carvajal for the starting spot on the right of the Real defence.
The fee is likely to be in the region of €30million.
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