Malaga director Francisco Aguilar has claimed that Real Madrid are interested in signing Isco this summer, but added that a transfer remains a long way from completion.
The Spain international has been in fine form for Malaga so far this term, netting eight goals in 35 Liga appearances, and his good performances have not gone unnoticed elsewhere.
"Real Madrid are interested in signing Isco, but nothing is official yet," Aguilar told Marca.
"It fills us with pride that a lad who has come through at Malaga has become the player that he is now.
"If he leaves Malaga it will be to a big club and it will be to the benefit of the coffers at Malaga. Clubs that want him will have to meet his buy-out clause."
Isco, 21, signed a new contract until June 2016 with Malaga back in January, which includes a €35 million exit clause.
Aside from Real Madrid, Paris Saint-Germain and Manchester City are also closely monitoring the attacking midfielder's situation.