The Belgian shot-stopper will now return to the Spanish capital and will sign a six-year deal with the European champions.
As part of the deal, Real midfielder Mateo Kovacic will join the Blues on a seaon-long loan.
A statement from Chelsea read:
Chelsea and Real Madrid have tonight agreed terms for the permanent transfer of Thibaut Courtois subject to the agreement of personal terms and passing a medical.
Subject to the completion of the deal Mateo Kovacic will join the Blues on a season-long loan.