The Croatian is set to extend his six-year stay at the club.
As per reports in Spanish media, Modric's pay has been increased and is now at par with skipper Sergio Ramos.
Modric was a target of Inter Milan this summer.
Modric gets huge pay rise at Real Madrid
Modric to earn €11 million a year
The 33-year-old mid-fielder is set to earn €11 million a year at Los Blancos.
It, in turn, will see the Croatian earn the joint second highest salary at the club.
Modric's former Tottenham Hotspur team mate Gareth Bale is currently the highest earner amongst Real players.
The report also added that Modric spoke to his family and decided to stay put.
Reports had claimed Modric to sign for Inter
Last week, certain reports had claimed that the player told his club that he is keen to sign for Inter Milan and ply his trades in Italy.
His agent Vlado Lemic was believed to have met with Real CEO Jose Angel Sanchez to talk about the mid-fielder's intentions.
There were talks between the two clubs, as Modric was expected to make a decision.
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Modric is valued highly by Real
The 32-year-old mid-fielder is every club's dream player at the moment.
He has won four Champions League titles with Real and had an excellent FIFA World Cup 2018.
Modric was awarded with the Golden Ball after helping Croatia reach the final.
His statistics in the coveted tournament show why he is the best in the world and Real value that.
Modric a Ballon d'Or contender
The Madrid star is no doubt one of the favorites to land the prestigious Ballon d'Or award. He won the UCL with Real and could be in line for the UEFA Super Cup next. His performances for both his club and country have been phenomenal.
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