The 23-year-old has been a revelation for Spurs since being converted from a full-back by Harry Redknapp, attracting the attention of top clubs with several eye-catching displays.
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And Modric, who was part of the Croatia side which inflicted a 2-0 defeat on Bale's Wales team on Tuesday night, feels the wideman is good enough to be reunited with him in La Liga.
"I agree [Bale] should play for Real Madrid and I hope he'll come", he told BBC Radio Wales.
"It would be amazing and I think he can [play for Real Madrid]. He's a good enough player."
Bale won the PFA Players' Player of the Year award for his performances during the 2010-11 campaign, which included netting a hat-trick at the San Siro against Inter.
Real Madrid have endured a difficult start to the current La Liga campaign and trail bitter rivals Barcelona by eight points after just seven games.