Details of the deal were not disclosed but Spanish newspaper Marca said Real have paid FC Tokyo a two million euro (£1.78 million) transfer fee, while Kubo was expected to have signed a five-year contract.
"Takefusa Kubo will come in to strengthen the Castilla ranks next season," La Liga side Real said in a statement on their website.
"A technically gifted and hugely talented attacking midfielder, he possess wonderful vision, quick feet and has an eye for goal."
Kubo, who made his Japan debut against El Salvador earlier this month, impressed for table-topping J League side FC Tokyo.
He is currently in Brazil with the rest of Hajime Moriyasu’s Japan squad preparing for the Copa America, which begins later on Friday. Samurai Blue’s first game is against Chile on Monday.
Kubo’s arrival in Madrid will not be his first taste of Spanish soccer, having joined Barcelona’s famed La Masia youth academy aged nine.
Nicknamed the ‘Japanese Messi’, Kubo was earmarked for a future at the Nou Camp but returned to Japan after Barcelona were found guilty of youth transfer breaches and handed a 14-month transfer ban by FIFA.
Real Madrid, under returning boss Zinedine Zidane, are making sweeping changes following a disappointing, trophy-less campaign last season.
Kubo joins the likes of Belgian playmaker Eden Hazard, striker Luka Jovic and defender Ferland Mendy in making moves to the Santiago Bernabeu in recent weeks.
(Reporting by Jack Tarrant, editing by Pritha Sarkar)
