The Portuguese manager is expected to be officially confirmed after Real Madrid's final La Liga match of the season against Athletic Club on Sunday.
Mourinho will then be presented in Madrid next week as the club begin another rebuild following a disappointing trophyless campaign.
Real Madrid turned back to Mourinho in the belief that his experience and strong personality can restore discipline and stability inside a dressing room that has faced growing criticism throughout the season.
Former defender Alvaro Arbeloa has been in temporary charge since Xabi Alonso was dismissed in January after only seven months in the role. Club president Florentino Perez reportedly saw Mourinho as the ideal figure to lead the next phase.
Mourinho spent this season with Benfica, guiding the Lisbon side to third place in the Portuguese league without losing a match. His contract included a release clause worth 2.6 million pounds, allowing him to leave after only eight months in charge.
Reports in Spain suggest Mourinho will bring four members of his Benfica coaching staff with him to Madrid as he prepares for a major challenge both on and off the pitch.
The 63-year-old still enjoys a strong relationship with Perez from his first spell at Real Madrid, while agent Jorge Mendes played a key role in finalising the agreement.
Mourinho's first period in Madrid remains one of the most intense eras in modern Spanish football. He was appointed in 2010 to challenge Pep Guardiola and his dominant Barcelona side.
Although Real Madrid suffered a painful 5-0 defeat to Barcelona early in Mourinho's reign, he quickly rebuilt the team into serious challengers. His side won the Copa del Rey before lifting the 2011/12 La Liga title with a record-breaking 100 points.
That Real Madrid team scored 121 league goals and recorded 32 victories, achievements that still rank among the greatest seasons in Spanish football history.
Mourinho now returns to a club filled with world-class talent but also difficult questions. Much attention will focus on how he manages stars such as Vinicius Junior and Kylian Mbappe as Real Madrid attempt to recover from one of their most disappointing seasons in recent years.
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