The Brazil international appeared to be destined to join Barcelona this summer, only for his club to turn down a second formal offer from the Catalans earlier this week talks continue.
Madrid are believed to be closely monitoring the 21-year-old's situation and Valdano would love to see Neymar make the move to the Bernabeu.
"It would be a huge coup if Real Madrid manage to sign Neymar," Valdano was quoted as saying by Marca. "Not just because he's a great player, but also because they'd then take him right from under Barcelona's nose."
He added, "I like Neymar a lot. Many of his individual actions result in a goal and often it's a move that only seems to be happening with him on the pitch."
Neymar has a contract with Santos until after the 2014 World Cup.