The 24-year-old winger returns to the Santiago Bernabeu side, having signed a five-year deal after impressing at Espanyol last season
Real Madrid have announced on their official website that they have completed the re-signing of Lucas Vazquez from Espanyol.
The winger came through the Madrid youth system, but failed to break into the first team under Carlo Ancelotti, before moving on to Espanyol last season.
Espanyol were hoping to activate their option to purchase the 24-year-old's contract outright from Madrid, although Madrid held an option to buy him back either this summer or next year.
Espanyol president Joan Collet stated earlier this week that the two sides had agreed a fee, believed to be around €1 million, that would see the Spaniard return to the capital, but the Catalan side are reportedly holding on to 25 per cent of his rights.
Madrid have now confirmed that the player has returned to the club and signed a five-year deal, becoming new head coach Rafael Benitez's first piece of business.
"Real Madrid have recovered the rights of Lucas Vazquez within the existing agreement with Espanyol," a statement reads.
"The player is tied to the club for the next five seasons."
During his solitary season at Espanyol, Vazquez scored three and set up a further six goals in 33 La Liga appearances.