Casemiro, 20, already has five international caps to his name and was reportedly on the radar of several of Europe's biggest clubs, including Paris St Germain and Internazionale.
He will begin his career in the Spanish capital with the club's 'B' team in the second division.
"The Brazilian midfielder, who has arrived on loan from São Paulo, will strengthen the reserve team until the end of the season," a statement on Madrid's official website confirmed.
A fee for the option to buy was not disclosed.
- Sports & Recreation