The 26-year-old joins Los Blancos for a fee reported to be around the €35m mark, where he will rival current incumbent Keylor Navas for the number one jersey at the Santiago Bernabeu.
Announcing the deal on their official website, a Real Madrid statement said: "Real Madrid CF and Chelsea FC have agreed to the transfer of player Thibaut Courtois, who remains linked to the club for the next six seasons.
"After the medical examination that will take place tomorrow, Thursday, August 9, the player will be presented at 1:00 pm in the honor box of the Santiago Bernabéu stadium. Subsequently, Courtois will step on the turf of the Santiago Bernabéu for the first time wearing the Real Madrid CF shirt and will attend the media in the press room."
As part of the deal, midfielder Mateo Kovacic will join Chelsea on a season-long loan.
Courtois had been at Stamford Bridge since 2011, having joined from Belgian Pro League side Genk for a fee of €9m. He went on to enjoy three highly successful years on loan at Atlético Madrid, scooping a La Liga and Copa Del Rey crown, as well as lifting the Europa League and Super Cup trophies.
He was a runner-up in the Champions League final with Atleti before returning to West London, where he ousted Petr Cech as the Blues' number one goalkeeper.
He made 154 appearances in all competitions for Chelsea, winning two Premier League titles, as well as last season's FA Cup and the EFL Cup during the 2014/15 season.
He has always been destined for a return to Madrid however, with his young family having remained in Spain following his stint with Atlético. The 2018 Golden Glove winner at this summer's World Cup reportedly went 'AWOL' in an attempt to force through a move, with Chelsea seemingly reluctant to part with one of their most prized assets.
The Blues subsequent capture of Athletic keeper Kepa Arrizabalaga has finally allowed Courtois to pursue his dream of playing for Real, where he will now take to one of the biggest stages of all in his quest to become the world's best goalkeeper.