Carlo Ancelotti is said to have put Reece James at the top of his list of summer transfer targets for Real Madrid.
This month, the Chelsea right-back impressed in both Champions League games against the Laliga side.
Real Madrid's scouting department examined James' performances and will now make a summer move for the England international.
According to the Mirror, Real Madrid has watched James at least nine times this season in preparation for a bid.
Ancelotti wants to'reshape' his team, and he believes the Blues' defender is the right player to sign.
Real Madrid are interested in replacing Dani Carvajal and Lucas Vazquez at right back.
However, they will need to offload several players before they can bring in any new players.
Real Madrid are aware that James will be expensive, but they believe the 22-year-old can improve even further.
James came up through the Chelsea ranks and has made 31 appearances in all competitions this season, scoring six goals and assisting seven.
Meanwhile, Ancelotti's team extended their lead at the top of the league to 15 points after a 3-2 win over Sevilla on Sunday.
The 62-year-old was impressed with his players' comeback, saying, 'It's a very important win after a bad first half.'
'The second half was fantastic for us.' We demonstrated dedication and personality.
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