Zidane, or Zizou as he is known will take over from Santiago Solari, who has been under pressure after his team were dumped out of the Champions League at home to Ajax last week.
Solari was set to be sacked on Monday evening according to reports.
The move has come as a huge shock to the world of football on Monday.
Zidane had apparently been approached by Real president Florentino Pérez on Friday but had requested to be given the weekend to mull over a return to the club he graced as a player and a manager.
Madrid president Florentino Perez has reportedly met with the board and resolved to dismiss Solari, with Zidane set to be his replacement, nine months after the he resigned at the end of last season.
Zidane could take training as early as Tuesday and be in charge for Madrid's La Liga game at home to Celta Vigo on Saturday.
His priority will be to secure Madrid's place in the top four after a turbulent fortnight that has seen them lose twice to Barcelona and knocked out by Ajax in the Champions League.
Zidane won that tournament in each of his three seasons in charge at the Santiago Bernabeu, as well as La Liga in 2016-17, while enjoying a strong relationship with the majority of the players.
Gareth Bale was one of the few not to see eye-to-eye with the Frenchman and Bale's future will become even more uncertain, should Zidane's appointment be confirmed.
Sergio Ramos had said earlier on Monday he accepts blame for the club's “deeply disappointing” season but insists the players have no say on the coaching situation.
Ramos posed a series of questions to himself on social media after Madrid had beaten Real Valladolid 4-1 in La Liga on Sunday night.
“As footballers we like to do our talking on the pitch but this season is not turning out that way,” Ramos wrote.
“Recent events have been disastrous and I'm not hiding. We are not hiding. We the players are primarily responsible and I, as captain, more than anyone.”
On Solari's position, Ramos said: “It's a decision that's not ours to make and in which we never interfere. We have enormous respect for the position and we always support the Real Madrid coach.
“These reflections are, without doubt, the result of a deeply disappointing season but if success didn't stop us, we're not going to let defeat stop us. It's our obligation to carry on, to work and to evolve.